Posted On: July 20, 2007, 4:01 pm CDT

Posted By: NTXCoog

Credit scoring works. Why? I don't know, but I've analyzed the numbers at my company and the higher the credit score, the higher the losses. I didn't really buy into credit scoring until I ran the numbers myself on my company's data.

For those of you that say, I have customers with good credit scores and lots of claims and vice versa... insurance is about large numbers. Even if you're looking at a few hundred customers, I've looked at numbers for over a hundred thousand customers. And that's not even for a large company.

We don't use it as a rater variable, but a simpler thing I've looked at is late installment payments. We looked at customers who are late with their installment payments more than twice, even if they never cancel, and they have about a 20% higher loss ratio than customers who pay on time. Again I don't know why, but the numbers are there.