Posted On: January 16, 2007, 4:39 pm CST

Posted By: Former GEICO employee

1. As a former GEICO agent, underwriter, and supervisor the point of using credit scoring isn't to penalize by putting poor people in the high risk company to make extra money. The poster who wrote that should go back to watching the History Channel Conspiracy marathon. It is to grow profitably in the most profitable segments in the most accurate and cost efficient way possible while ensuring high levels of insured retention. It isn't a conspiracy and this isn't a commune or kabutz (sp?). It is free enterprise capitalism at it's best. Any doubts compare the rate structures for auto in States that allow competition against those in highly regulated, particularly no-fault, states. Competition wins.

2. GEICO underwrites using occupation (as one of many, many variables) in most states because it is a legal discriminator (insurance by it's nature is discriminatory)which like other factors has a relevance to future claims likelihood. Like it or not sometimes stereotypes are accurate in life. I'll write 10,000 mechanical engineers at a lower rate that 10,000 roofers (because the engineers exhibit a higher level of responsibilty than the roofers as a group) or 10,000 police officers because as a group they are greater risk takers. You may not like it but being right is it's own defense.

3. Credit scoring in repeated studies over the last fifteen years has shown a greater correlation to claims filing than any other indicator to date including driving record. Don't like it, too bad. Insurance isn't about equality, see discriminatory above. Insurance uses legal, proven facts regarding large groups of similar risks to determine which groups are most likely to cost the most money. These groups are charged the most. If there is a problem with that then you should use hard work and education to improve your situation. Everyday homogeneous groups of McDonald's employees go to work. Some buy cars and treats and get into debt. Others buckle down, get an education or skill, and make something of their lives. Having come from nothing no one will ever convince me that anyone is stuck with the life they start with. Ok off that soapbox and back to the insurance one.

4. Credit scoring bias - Credit scoring isn't based on how much credit you have, possible minor debate on those models that include the number of credit accounts, but how well you pay your bills. Another poster commented on the impact of an emergency car repair or buying Johnny new xmas clothes: Generally these purchases would help your score and would only hurt if you didn't make your payments on time and/or used up more than a safe portion of your credit ratio to income. Live in Central LA and pay your bills on time (and don't tell me in the land of Captial one et al that everyone in this country isn't getting credit card offers)your credit will be ok. Live above your means in Beverly Hills and your credit won't be ok.

4. Lastly, yes there are exceptions. But folks, this is 2007, and if you haven't learned yet you can't manage by exception like in the 1920's and be a large company. Progressive started this in insurance and all they really did was take some of the manufacturing logic to the service industry. If you want service by exception you might be better served by some Independent Agents but for the majority who are buying a commodity, auto insurance, a company that can accurately rate 95%+ of the risks presented is going to be good enough. And at the end of day good enough has to be good enough.