There is not really a whole lot that can be added to what has been said already… regardless of which side of the fence that you are on. We all know why the companies utilize credit scoring and how they perceive that it helps them… let me tell you how it has helped me at an agency level.
Three years ago, I left my long-time captive relationship and became independent. Since I had a new chance to start over, I had the opportunity to look back and see what I liked in my captive agency and what I disliked.
Generally, what I hated was being tied to my desk handling service calls like…”Why did my bill go up $2 this month?” or ” My renewal is up $50 over the last one; I can’t afford this!” Then I would take the time to research the problem if there was one, or to explain the latest round of loss ratio issues and why costs associated with claims have risen, etc., etc. We all do this every day in our agencies.
The more I thought about it, the more I realized that these calls were actually causing my business to suffocate because my time was consumed with these types of issues. Not only did I not need to be taking these calls, my staff could be more effective by not having to deal with these calls. In creating the new independent agency, I realized that I had to create an environment where these types of service calls are minimized (I don’t think you can get rid of them completely).
Long story short, I did a number of things that have dramatically minimized these types of calls, but credit scoring has played a part of this. Because rates offered by standard carriers tend to be higher than Progressive (or should I now say “Drive”) in a situation where there is a lower credit score, those agents who rep “Drive” and other non-standard carriers are getting the customers that the standard carriers can’t (or won’t) compete for.
Since I don’t rep non-standard auto, the customers who cost me my time over minor/unnecessary issues go to other agents who are willing to be consumed in their time with these calls. Yes, I am giving up income related to these customers, but I am also giving up the excessive expense of handling two or three service calls from them every month or every other month.
Today, I am more profitable, not only with my carriers, but as an agency. I handle 2700 policies with one staff person (that’s right, I said one). And it’s because these minor calls just don’t happen with a great frequency any longer.
Is credit scoring perfect? No. But the companies know that actuarially, credit scoring will allow their pricing models to create profits. At my agency level, it has helped create a profitable book and has given me time to work “on” the business and not be consumed by constantly working “in” the business.
LLCJ says, “Like Smarty said, why don’t people have problems with phone companies using credit to deny phones? Why is it only insurance that cause people conniptions?” I have an answer for that. Because, under the law, we have to have insurance for our cars. There is no law that says I have to have a telephone. So, if a person was a victim of unfortunate circumstances, which resulted in a lower credit score, they may not be able to get affordable insurance, or any insurance. Therefore, no license plates, no inspection, no drivers license renewals. Not a lot of us can live in Texas without their cars!
I have participated and continued to keep up with the debate concerning this issue and article. I think we all have very valid points and are very passionate about the issue at hand. To help resolve some questions and misconceptions I have obtained the following information from our research and development team. First of all, a risk assessment score does NOT impact a persons credit score, this according to Fair Isaac the vendor that develops the score for us. An insurance company inquiry shows up as a “permissible purpose, insurance underwriting” entry. Secondly, regarding the issue of medical bills….As a part of Senate Bill 14 all companies were required to file a model proving they were in compliance with the new rules (ours was implemented in 2004) that excluded charge offs caused by medical bills. Finally, concerning the “hardships” brought on families and how this can negatively impact their credit scores used for insurance purposes. According to the company I represent, “we” do have the flexibility for certain extraordinary events to assign a rate that eliminates the credit influence. After having been a heavy participant in this issue I hope that this may have helped to answer some of our questions and concerns. I realize that some of us may represent more helpful companies than others but regardless it looks as though there are some laws in place that dismiss some of the arguements we have. What I take from this is that most of our arguements are just that, EXCUSES. It appears to me that although not flawless the system does work and it seems those that get penalized are generally the ones that DO NOT take care of their financial responsiblities thus possbily not the very assets and liabilities we insure. If you are concerned about the innocent not being treated fairly I would suggest you contact the company you represent and see what they can do. For the politicians I suggest they become more educated. For all of us, I remind you that credit scoring does NOT affect everyone negatively. Many of my insured’s have “greatly” benifited from the rewards of their financially committments.
LLCJ’s argument sounds real neat and tidy if your siting behind a desk, watching a computer crunch the numbers. I sometimes wonder if the insurance companies are using Stephen Hawkings “imaginary numbers”.
Ability to pay has no bearing on your driving habits. There just is no proof to that.
An argument for this use because of it holding the insurers costs down for collections is also absurd.
Let’s really cut to the chase OK? Whether I have a good credit score or not! It in no way represents my DRIVING risk to the insurance company.
That should be their only concern, DUI’s, driving record, and accidents. Period.
If this keeps up, we’ll all be rated on other very personal data that has no bearing on our risk as a driver.
There is one way to take care of all of this. The technology is in place already. We should pay at the fuel pump a portion of the cost per gallon based up on risk. That way everyone would have insurance, no more uninsured illegals, chronic drunks would be paying about 5 bucks a gallon, and little old ladies driving to the store would pay less.
Conceptually, and anecdotedly it may not make sense, but what you are missing is that it makes solid mathematical sense.
In an effort to underwrite better and to be more selective of their risk selections, insurers have done numerous statistical studies to try to ascertain better predictive methods of minimizing claims. Some results make anecdotal sense, others are surprising. But their validity is not in question.
The relation is there. It is mathematically provable, and it is truly predictive.
We cannot use what we personnally subjectively think is reality through our own experiences and perceptions to determine what is truth.
Who’s truth and who’s reality ?
To change the question, are you Jewish, Christian, Muslim or Hindu?
In your own words
“Conceptually, and anecdotedly it may not make sense, but what you are missing is that it makes solid sense.
In an effort to underwrite better and to be more selective of their risk selections, insurers have done numerous statistical studies to try to ascertain better predictive methods of minimizing claims. Some results make anecdotal sense, others are surprising. But their validity is not in question.
We cannot use what we personnally subjectively think is reality through our own experiences and perceptions to determine what is truth.
The relation is there. It is mathematically provable, and it is truly predictive.”
Who’s truth and who’s reality ?
a comparison and a correlation are not causeation. only causeation should be used to set rates for all types of insurance.
LLCJ – Yes, I did read all four comments before responding. It would have been more practical to respond to 4 in one post rather than 4 separate ones…and no, I didn’t respond because I had already made my comments in one post. Of course, it appears that everyone is still missing my point that no one is using their own reasoning skills anymore but relying on automated tools that require little human ability or talents.
“a comparison and a correlation are not causeation. only causeation should be used to set rates for all types of insurance.”
That is a crazy statement.
Does being young cause you to have accidents? No. (But young people do tend to have more accidents)
Does where you live cause you to have accidents? No. (But more accidents do happen in cities than in rural areas)
Does driving a certain car cause you to have accidents? No (But some cars do protect you better & drivers of certain types of vehicles like sports cars do tend to have more accidents).
Does Speeding in your car cause accidents? Sometimes. But every time you speed, you don’t get into an accident so speeding itself doesn’t cause an accident. And speeders do tend to have more accidents.
Does being in an accident previously cause you to have an accident? No (But sometimes people who have accidents are bad drivers so they have more accidents).
The only things that cause accidents are the drivers actions at the time of the wreck or mechanical failure. All rating elements (liability coverages only) are predictors of 1) whether you’ll have an accident & 2) whether you’ll file a claim if you do have an accident. Credit scoring is just a tool that helps predict that like all of the other rating elements.
Thanks Barbara. The difference is that mortgage companies make more profit by selling you a higher loan. As long as your home is worth what they loan you, they’re protected. And my credit is perfect…thanks for checking. Military families are a great example and obviously there are probably several cases which need to be looked at on an individual basis. Identity theft is provable. 95% of cases fall into neither of these.
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There is not really a whole lot that can be added to what has been said already… regardless of which side of the fence that you are on. We all know why the companies utilize credit scoring and how they perceive that it helps them… let me tell you how it has helped me at an agency level.
Three years ago, I left my long-time captive relationship and became independent. Since I had a new chance to start over, I had the opportunity to look back and see what I liked in my captive agency and what I disliked.
Generally, what I hated was being tied to my desk handling service calls like…”Why did my bill go up $2 this month?” or ” My renewal is up $50 over the last one; I can’t afford this!” Then I would take the time to research the problem if there was one, or to explain the latest round of loss ratio issues and why costs associated with claims have risen, etc., etc. We all do this every day in our agencies.
The more I thought about it, the more I realized that these calls were actually causing my business to suffocate because my time was consumed with these types of issues. Not only did I not need to be taking these calls, my staff could be more effective by not having to deal with these calls. In creating the new independent agency, I realized that I had to create an environment where these types of service calls are minimized (I don’t think you can get rid of them completely).
Long story short, I did a number of things that have dramatically minimized these types of calls, but credit scoring has played a part of this. Because rates offered by standard carriers tend to be higher than Progressive (or should I now say “Drive”) in a situation where there is a lower credit score, those agents who rep “Drive” and other non-standard carriers are getting the customers that the standard carriers can’t (or won’t) compete for.
Since I don’t rep non-standard auto, the customers who cost me my time over minor/unnecessary issues go to other agents who are willing to be consumed in their time with these calls. Yes, I am giving up income related to these customers, but I am also giving up the excessive expense of handling two or three service calls from them every month or every other month.
Today, I am more profitable, not only with my carriers, but as an agency. I handle 2700 policies with one staff person (that’s right, I said one). And it’s because these minor calls just don’t happen with a great frequency any longer.
Is credit scoring perfect? No. But the companies know that actuarially, credit scoring will allow their pricing models to create profits. At my agency level, it has helped create a profitable book and has given me time to work “on” the business and not be consumed by constantly working “in” the business.
I hope credit scoring stays around.
LLCJ says, “Like Smarty said, why don’t people have problems with phone companies using credit to deny phones? Why is it only insurance that cause people conniptions?” I have an answer for that. Because, under the law, we have to have insurance for our cars. There is no law that says I have to have a telephone. So, if a person was a victim of unfortunate circumstances, which resulted in a lower credit score, they may not be able to get affordable insurance, or any insurance. Therefore, no license plates, no inspection, no drivers license renewals. Not a lot of us can live in Texas without their cars!
I have participated and continued to keep up with the debate concerning this issue and article. I think we all have very valid points and are very passionate about the issue at hand. To help resolve some questions and misconceptions I have obtained the following information from our research and development team. First of all, a risk assessment score does NOT impact a persons credit score, this according to Fair Isaac the vendor that develops the score for us. An insurance company inquiry shows up as a “permissible purpose, insurance underwriting” entry. Secondly, regarding the issue of medical bills….As a part of Senate Bill 14 all companies were required to file a model proving they were in compliance with the new rules (ours was implemented in 2004) that excluded charge offs caused by medical bills. Finally, concerning the “hardships” brought on families and how this can negatively impact their credit scores used for insurance purposes. According to the company I represent, “we” do have the flexibility for certain extraordinary events to assign a rate that eliminates the credit influence. After having been a heavy participant in this issue I hope that this may have helped to answer some of our questions and concerns. I realize that some of us may represent more helpful companies than others but regardless it looks as though there are some laws in place that dismiss some of the arguements we have. What I take from this is that most of our arguements are just that, EXCUSES. It appears to me that although not flawless the system does work and it seems those that get penalized are generally the ones that DO NOT take care of their financial responsiblities thus possbily not the very assets and liabilities we insure. If you are concerned about the innocent not being treated fairly I would suggest you contact the company you represent and see what they can do. For the politicians I suggest they become more educated. For all of us, I remind you that credit scoring does NOT affect everyone negatively. Many of my insured’s have “greatly” benifited from the rewards of their financially committments.
LLCJ’s argument sounds real neat and tidy if your siting behind a desk, watching a computer crunch the numbers. I sometimes wonder if the insurance companies are using Stephen Hawkings “imaginary numbers”.
Ability to pay has no bearing on your driving habits. There just is no proof to that.
An argument for this use because of it holding the insurers costs down for collections is also absurd.
Let’s really cut to the chase OK? Whether I have a good credit score or not! It in no way represents my DRIVING risk to the insurance company.
That should be their only concern, DUI’s, driving record, and accidents. Period.
If this keeps up, we’ll all be rated on other very personal data that has no bearing on our risk as a driver.
There is one way to take care of all of this. The technology is in place already. We should pay at the fuel pump a portion of the cost per gallon based up on risk. That way everyone would have insurance, no more uninsured illegals, chronic drunks would be paying about 5 bucks a gallon, and little old ladies driving to the store would pay less.
Ted,
Conceptually, and anecdotedly it may not make sense, but what you are missing is that it makes solid mathematical sense.
In an effort to underwrite better and to be more selective of their risk selections, insurers have done numerous statistical studies to try to ascertain better predictive methods of minimizing claims. Some results make anecdotal sense, others are surprising. But their validity is not in question.
The relation is there. It is mathematically provable, and it is truly predictive.
We cannot use what we personnally subjectively think is reality through our own experiences and perceptions to determine what is truth.
Who’s truth and who’s reality ?
To change the question, are you Jewish, Christian, Muslim or Hindu?
In your own words
“Conceptually, and anecdotedly it may not make sense, but what you are missing is that it makes solid sense.
In an effort to underwrite better and to be more selective of their risk selections, insurers have done numerous statistical studies to try to ascertain better predictive methods of minimizing claims. Some results make anecdotal sense, others are surprising. But their validity is not in question.
We cannot use what we personnally subjectively think is reality through our own experiences and perceptions to determine what is truth.
The relation is there. It is mathematically provable, and it is truly predictive.”
Who’s truth and who’s reality ?
a comparison and a correlation are not causeation. only causeation should be used to set rates for all types of insurance.
LLCJ – Yes, I did read all four comments before responding. It would have been more practical to respond to 4 in one post rather than 4 separate ones…and no, I didn’t respond because I had already made my comments in one post. Of course, it appears that everyone is still missing my point that no one is using their own reasoning skills anymore but relying on automated tools that require little human ability or talents.
“a comparison and a correlation are not causeation. only causeation should be used to set rates for all types of insurance.”
That is a crazy statement.
Does being young cause you to have accidents? No. (But young people do tend to have more accidents)
Does where you live cause you to have accidents? No. (But more accidents do happen in cities than in rural areas)
Does driving a certain car cause you to have accidents? No (But some cars do protect you better & drivers of certain types of vehicles like sports cars do tend to have more accidents).
Does Speeding in your car cause accidents? Sometimes. But every time you speed, you don’t get into an accident so speeding itself doesn’t cause an accident. And speeders do tend to have more accidents.
Does being in an accident previously cause you to have an accident? No (But sometimes people who have accidents are bad drivers so they have more accidents).
The only things that cause accidents are the drivers actions at the time of the wreck or mechanical failure. All rating elements (liability coverages only) are predictors of 1) whether you’ll have an accident & 2) whether you’ll file a claim if you do have an accident. Credit scoring is just a tool that helps predict that like all of the other rating elements.
Thanks Barbara. The difference is that mortgage companies make more profit by selling you a higher loan. As long as your home is worth what they loan you, they’re protected. And my credit is perfect…thanks for checking. Military families are a great example and obviously there are probably several cases which need to be looked at on an individual basis. Identity theft is provable. 95% of cases fall into neither of these.