Texas Senators to File Bill Banning Use of Credit Scores

January 11, 2005

  • January 12, 2005 at 11:40 am
    Mark says:
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    Insurance companies aren’t allowed to consider medical bills in their credit scores. Prove it to them, and they have to adjust.

    Same with military.

    If they quality for a 300K house and they can’t afford a new roof or repairs from a little water damage because they;re now overextended, they’ll file a claim. It makes perfect sense.

  • January 12, 2005 at 11:57 am
    Smarty says:
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    First, there has been to many studies to ignore that show there is a justification for the use of credit to predict future claims. They all say it works, so get over it.

    What I’m wondering, if you think it shouldn’t be used, then do you agree that it shouldn’t be used to get phone service? The ability to buy a house? Get a job? Have a credit card? Who has more at risk, a mortgage company on a $200K loan or an insurance company insuring a home for $200K? It’s the insurance company. You default on a loan, the bank takes the house and sells it and gets most of its money back. Someone burns down a house to get the money and the insurance company has to pay $200 for the home, $120K on per. prop., loss of use, etc…. A bank may lose $10 to $20K, the insurance company loses $400. That’s why someone can qualify for a house loan yet still get rejected on insurance. Credit works, period. Is it perfect, no, but neither is basing rates on age.

    I’ve read, my customers have medical problems and all sorts of other issues, well those issues are real but are a small percentage compared to the rest of the population. I’ve noticed those with better credit not only take care of the things better, also carry higher deductibles. I also seem more of them pay for claims out of their own pocket instead of getting the claims record dinged. Never does that happen when someone has poor credit.

    Stop the whinning and support your industry, it’s for you own good

  • January 13, 2005 at 1:16 am
    Thompson says:
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    This is obviously a subject that hits home with all of us. I am a middle aged woman who has been an agent for over 20 years and in the insurance industry for over 25. I must admit, next to the “mold crises” (which our polictians had not a clue)this is the second worst issue I have dealt with in my profession. As I stated in an earlier comment life WAS much easier without “credit scoring” but lets get real. If you are an agent you are also a field underwriter (or should be). If you work with your risk you see the results. There is merit in the system, although not pefected. Understanding the whole process and perfecting it is what the legislators need to work on…not just taking the obvious and say this has got to go. I also work as a captive agent. I feel for those who don’t or can’t take advantage of the scoring. We are allowed to use either spouse to obtain the best score thus the best rate. We can also rerun the score every 10 months if it will benefit our insureds. For those who qualify based on their credit scores, we reward them with the lowest rates I have seen in many years. What about these people? They are happy, so we (and the politicians) don’t hear from them like we do the ones that are negatively impacted. For those who are “negatively” impacted I sometimes think the words “it’s your credit score” does more damage than the actual resulting premium. My company has developed so many addtional discounts one can earn that if they take advantage of these reductions, the rates (even with a “bad” credit score) are lower than what they may have been before. Based on my experience and what “I” have seen in my many years, there generally is a connection between the way one handles his financial responsibilities, the pride or “lack of” he takes in his property, etc…versus the claims that are generated from that risk. Think about it. Generally (not always) those who have poorer credit scores usually have vehicles and homes that are not regularly maintained. Lack from “pride of ownership” is generally an issue also. I realize that in some occasions there are those who fall to misfortune due to no responsibility of their own (these are the ones that fall through the cracks). If these signs are evident how can those be considered your “A” or even “B” risk. It all has to do with “risk management”. At one time I’m sure the “youthful drivers” of the world didn’t think it was fair either that they be charged higher premiums because “statistics showed” that due to their lack of driving experience they were more prone to claims. Personally, I think the majority of the problem lies with lack of information for “all”. The studies that either prove or disprove the statistics and the reasoning behind them should be “out there” for the public to see.

  • January 12, 2005 at 3:17 am
    Harvey says:
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    You need to tell Senator eLLIS that the lateness of a bill payment does show that a person might be late on other bills, which shows insurance companies that they might not be watchful in reducing their insurance claims which causes everyones insurance rates to increase.

  • January 12, 2005 at 3:19 am
    Cut The Crud says:
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    I am so sick of hearing this kind of self-serving mularky. A credit score doesn’t care where you were born or what tint your skin is. It reflects whether you know what “DUE DATE 2/15/05” means. A credit score doesn’t award more points to higher-income or “majority” individuals or less to those with lower-income or minorities. It tells one thing: Whether you know how to spend less than you make and honor your commitments! Whether you make 5k or 500k a year, you learn to live within your means and not spend money you don’t have–if you buy something with money you don’t have how is that different from stealing? If you’re “a month late on your Chevron bill” as the senator suggests, why shouldn’t a carrier expect you to be late with premium payments? As a carrier, if I can avoid these customers, I can charge less and still make more by having a smaller collections/cancellation dept. Further, a single late payment will not affect your credit score much, if at all. Poor scores typically reflect a PATTERN of payment problems. That’s what any business in any industry wants to avoid. Allowing poor-payers to obtain coverage at lower rates increases carrier expense and prompt-payer’s premiums…making it just another subsidy. Call it what it is senators.

  • January 12, 2005 at 3:39 am
    Senior agent says:
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    “Cut the Crud” overlooks facts that illness and other factors frequently impacts credit scores, particularly among seniors which I serve. In my 20 years P & C experience, I have never found a correlation between claims and credit. I hope “Cut the Crud” never has to contest a hospital bill or gets credit errors posted to his accounts; he’ll change his mind about credit scoring. Why is a person with average or “fair” credit with no losses for past five years a greater risk than a person with a superior credit score but with “a few tickets and a ‘ding or two’ on his CLUE report”?

  • January 12, 2005 at 3:39 am
    Scoring says:
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    The UT School of Business, regardless of emotional acceptance or denial, published a 16 page study which supported a link between scoring and losses.

  • January 12, 2005 at 3:44 am
    Hoyden says:
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    The only correct thing to say about the credit scoring is; IT IS MAKING THE CREDIT REEPORTING AGENCYS RICH. They and Fair Issac thoutht this up to CON the Insurance Conpanies and the general public into ordering multiple reports from them. Not paying does not cause you to crash into anyone. How in this world did the insurance companies make it through all those years without credit scoring?

  • January 12, 2005 at 4:19 am
    Thompson says:
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    Although I feel the pain of those (including myself, I have too much debt ratio) whose credit scores could help them to obtain lower rates, I agree that statistic do reflect a relationship between responsibility in every day life and risk factors for insurance purposes. I have generaly found that those who (not due to illness) continue to slack in their financial responsibilities also tend to have less maintained property and vehicles, thus ultimately making them a greater risk for claims than those who take pride in their property and responsibilties. As an agent of over 20 years myself, I admit life was much easier before credit scoring. Unfortunately, no matter how you look at it there is some justification for the companies needs to use it. I really fell the answer for everyone is if credit scoring could be “fine tunned” to represent the true picture in every case and weed out the unfair treatment to the innocent such as insufficient credit and credit problems due to illnesses.

  • January 12, 2005 at 4:25 am
    Hoyden says:
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    I Sell for a Captive company and they are the first to admit that the credit score is a moving target. The score today may change and be better or worse tomorrow. The companies don’t want to change the score once it is obtained. We are not supposed to run a credit score after the first time because the score may improve and the rate will be lowered costing the company premium. By the way the score may only be changed for the better after it is first run unless there is a major change in the policy, this may be purchase of a vehicle, addition of a driver or if one auto goes out of force and is reinstated. The score will be different for the husband and the wife even if they have used the same bank account to pay all the bills fore 50 years. The husbands credit score may be excellent but when he dies the wife has no credit history of her own so her score is terrible. Where is the fairness in this? Credit scores are applicable in lending only and should not be applied to insurance.



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