Actuaries Have Special Role When Explaining Credit Scores and Losses
National News • November 16, 2007
By explaining why there is an association between credit scores and insurance losses, insurers and actuaries can promote a better understanding of why credit scores are a useful underwriting tool, ...
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Subject: RE: Credit Scores & Insurance
Posted On: November 16, 2007, 3:34 pm CST
Posted By: Bill
Comment:
Good explanation and theories.
A couple of things from my own observations. First of all, blanketing all formulas that insurance companies use under the same umbrella is incorrect. Some companies use pretty much a straight credit score. Most use credit as one criteria, but factor in many other (secret) variables.
The national media has always assumed that because a person is low-income or doesn't live in the right part of town, they automatically pay more in premium. That is definitely not the case. In fact, I have seen the opposite happen on more than one occasion.
Credit scoring is nothing more than the latest predicting tool. It will continue to undergo many changes in the future, and will never be a perfect tool. Unfortunately, many/most underwriters are no longer given any latitude when it comes to what a customer pays. If their score says they pay X, then they pay X or go elsewhere.
Subject: RE: Credit Scores & Insurance
A couple of things from my own observations. First of all, blanketing all formulas that insurance companies use under the same umbrella is incorrect. Some companies use pretty much a straight credit score. Most use credit as one criteria, but factor in many other (secret) variables.
The national media has always assumed that because a person is low-income or doesn't live in the right part of town, they automatically pay more in premium. That is definitely not the case. In fact, I have seen the opposite happen on more than one occasion.
Credit scoring is nothing more than the latest predicting tool. It will continue to undergo many changes in the future, and will never be a perfect tool. Unfortunately, many/most underwriters are no longer given any latitude when it comes to what a customer pays. If their score says they pay X, then they pay X or go elsewhere.