Posted On: November 9, 2006, 11:57 am CST

Posted By: M

As an employee of the insurance industry, I would stipulate that the insurance industry as a whole does not accept credit scoring as a perfect way to underwrite risk. If it can be treated as a corollary way to analyze risk - great, but life does happen as someone indicated in another comment.

The saddest thing by far is that once your credit does take a dip - it takes YEARS to show improvement. For individuals who may already be at risk for higher rates - ie someone who suffers an unexpected unemployment or may have a catastrophic illness in the family not fully covered by health insurance - they may suffer late payments or a higher debt to income ratio, this kind of ratemaking can spell doom for that particular insured. We all know that kind of changes taking place in healthcare insurance, it could happen to most people!

Another thing to consider is that insurers are using all different sorts of credit models - what one company considers "gold" may merely by an average risk for another carrier. Do consumers know that with some companies - merely shopping for a good rate on a loan for your home or car can affect your credit rating?

Standardization is a bare minimum that is needed to make credit rating fair.