Insurance companies would have us believe that ins scoring is not disproportionately unfair to poor people. But, have they ever told us what the average ins score of someone making 15 to 20k is? After rent and a myriad of other expenses, depending on whether or not you have children, most people will struggle to pay their bills on this income and eventually their credit score is going to suffer.
So, we have to ask ourselves do we think the poor should pay more than the rich for car insurance?
While we are at it, what are numbers based on race. Do Hispanics have more accidents? How about blacks? We have determined it to be illegal to charge a higher rate based on race, even if there is an actuarial connection. In the end maybe credit scoring isn\’t as \”fair\” as we think it is.
Also, rates should not go up with out credit scoring, the people who have good credit scores would just pay more, and the other people would pay less. Its a matter of distribution. Why would a lack of credit scoring make rates go up across the board?????
Oh yea, if you are already paying a higher amount based on the fact that your score is low and they think you MIGHT have an accident and cost the ins co more money, then isnt it like charging double when you surcharge that person for an accident that they actually do have??
Skip ins scores and increase the surcharge on accident AND even COMP claims. ADD a surcharge for the number of late payments. All of these things would be more fair.
To simple say that people with high credit scores will have fewer losses is true. The point is it is as dicriminationg as saying people under 5 feet tall have more accident becuase they are short. I have heard the typical insurance industry response if you don\’t like it go somewhere else, or start you own insurance company with only poor insurance risks. Sorry, but this arrogance by the industry does not make it right, just another business decision rationalized by power………
As an employee of the insurance industry, I would stipulate that the insurance industry as a whole does not accept credit scoring as a perfect way to underwrite risk. If it can be treated as a corollary way to analyze risk – great, but life does happen as someone indicated in another comment.
The saddest thing by far is that once your credit does take a dip – it takes YEARS to show improvement. For individuals who may already be at risk for higher rates – ie someone who suffers an unexpected unemployment or may have a catastrophic illness in the family not fully covered by health insurance – they may suffer late payments or a higher debt to income ratio, this kind of ratemaking can spell doom for that particular insured. We all know that kind of changes taking place in healthcare insurance, it could happen to most people!
Another thing to consider is that insurers are using all different sorts of credit models – what one company considers \”gold\” may merely by an average risk for another carrier. Do consumers know that with some companies – merely shopping for a good rate on a loan for your home or car can affect your credit rating?
Standardization is a bare minimum that is needed to make credit rating fair.
I can tell that several of you don\’t understand insurance credit scoring very well.
You all are aware that your insurance credit score is not the same as your regular lending credit score aren\’t you?
For example, many insurance companies exclude items such as Medical Related charges specifically for the reasons mentioned earlier in these messages and b/c they have poor predictive power. If you want to see a good example google Allstate\’s most recent credit scoring model they were forced to disclose.
Also, I think some people on here have misguided concepts of what is fair. I have built and maintained a good credit score. I don\’t think it is fair to prevent me from using that to my advantage to obtain a better insurance rate. It isn\’t my job to subsidize worse insurance risks than myself. In fact, that sounds the oppossite of fair.
If you want insurance welfare, at least do it explicity through direct government subsidization of insurance premiums for high risk insurance customers rather than the hidden taxation currently in place by way of manipulating, restricting, and regulating insurer rating plans. At least through explicit subsidization, voters can see the actual costs and vote accordingly in a demogractic fashion to either expand or contract the subsidies.
Anonymous, you have built up your credit score based on the fact that you make more money than you spend. If you were a poor person this might not be posible. So yes, you may be smarter and at an advantage due to your job and economic status, the question is do you want to use your advantage to hold poor people down, or help disadvantaged people? When your rates go down due to your credit score, they go down at the cost of higher rates for poor people and often minorities. It actually tells a lot about you as a human being.
Poor people are a burden on social services, so do we raise taxes on the poor people? It just doesnt add up, unless you are trying to create a society where the rich get richer and the poor get poorer.
Sorry guys, but show me a divorced/single mother who tries to pay her bills w/late support payments and/or a person who tries to trade in a vehicle w/a dealership who is trying to obtain financing for well over the value of a vehicle and you have a \”victim\” of poor credit ratings, even though the issue is out of her or his control… the math just doesn\’t add up and when it comes to the affluent filing less claims, may be true but when they file a claim it\’s usually for a larger amount due to the fancy car or the fancy toy that got damaged, you won\’t find a \”poor\” person driving a $40,000 vehicle or carrying high end limits, all of which can be paid out in a one-time incident causing a much larger loss to the insurance company than three or four \”poor\” credit risks claims. Still just doesn\’t add up to me
What I cannot believe is a company that insures a homeowner for 5 years then non-renews for year 6 stating that their credit score was too low to renew! 5 years without a claim and they are now a bad risk? Something is not quite right but I ended up with a new client who qualifed for a \”loss-free\” discount.. go figure!
Which 8? How about we just get rid of insurance altogether and just let people pay for their own repairs and medical bills??? Insurance is not individually priced. Similar groups are pooled together to spread the risk and cost to the benfit of the group. As a pool, the group of 10 with low credit scores are twice as likely to have an accident and should pay twice the price that the higher credit group pays.
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Insurance companies would have us believe that ins scoring is not disproportionately unfair to poor people. But, have they ever told us what the average ins score of someone making 15 to 20k is? After rent and a myriad of other expenses, depending on whether or not you have children, most people will struggle to pay their bills on this income and eventually their credit score is going to suffer.
So, we have to ask ourselves do we think the poor should pay more than the rich for car insurance?
While we are at it, what are numbers based on race. Do Hispanics have more accidents? How about blacks? We have determined it to be illegal to charge a higher rate based on race, even if there is an actuarial connection. In the end maybe credit scoring isn\’t as \”fair\” as we think it is.
Also, rates should not go up with out credit scoring, the people who have good credit scores would just pay more, and the other people would pay less. Its a matter of distribution. Why would a lack of credit scoring make rates go up across the board?????
Oh yea, if you are already paying a higher amount based on the fact that your score is low and they think you MIGHT have an accident and cost the ins co more money, then isnt it like charging double when you surcharge that person for an accident that they actually do have??
Skip ins scores and increase the surcharge on accident AND even COMP claims. ADD a surcharge for the number of late payments. All of these things would be more fair.
To simple say that people with high credit scores will have fewer losses is true. The point is it is as dicriminationg as saying people under 5 feet tall have more accident becuase they are short. I have heard the typical insurance industry response if you don\’t like it go somewhere else, or start you own insurance company with only poor insurance risks. Sorry, but this arrogance by the industry does not make it right, just another business decision rationalized by power………
As an employee of the insurance industry, I would stipulate that the insurance industry as a whole does not accept credit scoring as a perfect way to underwrite risk. If it can be treated as a corollary way to analyze risk – great, but life does happen as someone indicated in another comment.
The saddest thing by far is that once your credit does take a dip – it takes YEARS to show improvement. For individuals who may already be at risk for higher rates – ie someone who suffers an unexpected unemployment or may have a catastrophic illness in the family not fully covered by health insurance – they may suffer late payments or a higher debt to income ratio, this kind of ratemaking can spell doom for that particular insured. We all know that kind of changes taking place in healthcare insurance, it could happen to most people!
Another thing to consider is that insurers are using all different sorts of credit models – what one company considers \”gold\” may merely by an average risk for another carrier. Do consumers know that with some companies – merely shopping for a good rate on a loan for your home or car can affect your credit rating?
Standardization is a bare minimum that is needed to make credit rating fair.
I can tell that several of you don\’t understand insurance credit scoring very well.
You all are aware that your insurance credit score is not the same as your regular lending credit score aren\’t you?
For example, many insurance companies exclude items such as Medical Related charges specifically for the reasons mentioned earlier in these messages and b/c they have poor predictive power. If you want to see a good example google Allstate\’s most recent credit scoring model they were forced to disclose.
Also, I think some people on here have misguided concepts of what is fair. I have built and maintained a good credit score. I don\’t think it is fair to prevent me from using that to my advantage to obtain a better insurance rate. It isn\’t my job to subsidize worse insurance risks than myself. In fact, that sounds the oppossite of fair.
If you want insurance welfare, at least do it explicity through direct government subsidization of insurance premiums for high risk insurance customers rather than the hidden taxation currently in place by way of manipulating, restricting, and regulating insurer rating plans. At least through explicit subsidization, voters can see the actual costs and vote accordingly in a demogractic fashion to either expand or contract the subsidies.
Anonymous, you have built up your credit score based on the fact that you make more money than you spend. If you were a poor person this might not be posible. So yes, you may be smarter and at an advantage due to your job and economic status, the question is do you want to use your advantage to hold poor people down, or help disadvantaged people? When your rates go down due to your credit score, they go down at the cost of higher rates for poor people and often minorities. It actually tells a lot about you as a human being.
Poor people are a burden on social services, so do we raise taxes on the poor people? It just doesnt add up, unless you are trying to create a society where the rich get richer and the poor get poorer.
Sorry guys, but show me a divorced/single mother who tries to pay her bills w/late support payments and/or a person who tries to trade in a vehicle w/a dealership who is trying to obtain financing for well over the value of a vehicle and you have a \”victim\” of poor credit ratings, even though the issue is out of her or his control… the math just doesn\’t add up and when it comes to the affluent filing less claims, may be true but when they file a claim it\’s usually for a larger amount due to the fancy car or the fancy toy that got damaged, you won\’t find a \”poor\” person driving a $40,000 vehicle or carrying high end limits, all of which can be paid out in a one-time incident causing a much larger loss to the insurance company than three or four \”poor\” credit risks claims. Still just doesn\’t add up to me
What I cannot believe is a company that insures a homeowner for 5 years then non-renews for year 6 stating that their credit score was too low to renew! 5 years without a claim and they are now a bad risk? Something is not quite right but I ended up with a new client who qualifed for a \”loss-free\” discount.. go figure!
Which 8? How about we just get rid of insurance altogether and just let people pay for their own repairs and medical bills??? Insurance is not individually priced. Similar groups are pooled together to spread the risk and cost to the benfit of the group. As a pool, the group of 10 with low credit scores are twice as likely to have an accident and should pay twice the price that the higher credit group pays.
We definately have used pooling for years, however, this pool is no more valid than race. This is called dirty pool, validity does not make it right.