The Impact of Credit-Based Insurance Scoring on the Availability and Affordability of Insurance - Part I
National News • September 24, 2008
Following is the testimony presented by Lawrence S. Powell, PhD before the United States House of Representatives Financial Services Committee Oversight & Investigations Subcommittee on May 21, ...
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Subject: RE: Re: The Impact of Credit-Based Insurance Scoring on the
Posted On: September 29, 2008, 10:33 am CDT
Posted By: another guy named Rick
Comment:
Bernard P.,
Your comments in paragraphs 3 and 4, do nothing to reassure those who doubt the use of credit scoring. IF the credit score is applied to a 'group' of drivers (in this case those with lower credit scores) how do you make the leap to 'risky' drivers being paid for by 'good' drivers? You have now taken a group-based data set and begun to apply it to the individual, causal factors of drivers with low credit scores.
The good Doctor does not do this. All of the vendors of this information claim that credit scoring allows you to segregate a 'group' that performs less well than those with good credit. Credit scoring can not tell me, as an underwriter, which risk will have losses.....so I surcharge an entire segment for the losses of those with bad driving habits while others in that segment exhibit good loss experience. Ultimately, the good drivers in the low credit score group pay for the drivers with bad experience. Tough luck for them?!
Subject: RE: Re: The Impact of Credit-Based Insurance Scoring on the
Your comments in paragraphs 3 and 4, do nothing to reassure those who doubt the use of credit scoring. IF the credit score is applied to a 'group' of drivers (in this case those with lower credit scores) how do you make the leap to 'risky' drivers being paid for by 'good' drivers? You have now taken a group-based data set and begun to apply it to the individual, causal factors of drivers with low credit scores.
The good Doctor does not do this. All of the vendors of this information claim that credit scoring allows you to segregate a 'group' that performs less well than those with good credit. Credit scoring can not tell me, as an underwriter, which risk will have losses.....so I surcharge an entire segment for the losses of those with bad driving habits while others in that segment exhibit good loss experience. Ultimately, the good drivers in the low credit score group pay for the drivers with bad experience. Tough luck for them?!