Posted On: October 11, 2006, 2:50 pm CDT

Posted By: Griff

Just because a person has bad credit does not mean that they are poor. A credit score is an indicator of managing debt and financial responsibility, not how much money you make. A low income person has to manage their debts just as a high income person does and live at an approriate means that they can afford.

The insurers get hit when a re-instatement, cancellation, etc. is imposed. True they get back the commissions, but if you think that is thier main expense than you are grossly mistaken. Expenses can include, but are not limited to pay plan set-ups, MVR, CLUE reports, credit checks, overhead expenses for employees and processes, and transaction expeses associated with issuance.

Now think about this - if we didn't use credit scoring, the people that are more financially responsible (regardless of income) will end up subsitizing the people who are not in order for insurers to write at a profitable level and be able to cover the associated financial costs. Credit more accurately predicts a customers total risk, if we didn't use it than the people who are more financially reponsible would have to pay higher premiums and the people who are not (higher risk to the insurer) would receive lower premiums.

Is it fair for people who are more financially responsible to pay for people who are not?