I forgot to mention that State Net database lists 47 states that are going to do away with DUI (DWI) surcharge and make it law that insurance companies can no longer increase rates due DUI activity. The Governors of each state will sign this into law.
The state regulators are cluesless when it comes to understanding the complex insurance score models used by insurers. I would like to see one state regulator explain a model.
Bad Credit = Bad Risk = People who rip off society = No personal responsibility = poor employees = people who will take advantage of you
Yes, there are exceptions to the rule, such as medical reasons, however if these people had proper insurance and proper life management (savings, etc) they would never have credit problems.
***This is from the most recent issue of the State Net Capitol Journal. Lots of info, may be difficult to read. Copied and pasted from a .pdf, sorry for the eye strain.***
States debate insurers’ use of credit scoring
The insurance industry has long believed there is a direct correlation between a person’s credit history and the likelihood they will file an insurance claim. As such, insurers regularly use consumer credit scores to help establish rates. But consumer groups vehemently oppose the practice, saying it discriminates against the poor and minorities. The debate has resulted in a plethora of bills seeking to end the use of credit scoring in insurance every year since 2002, including 83 this year. But to date, only HAWAII has completely banned the use of credit scores in determining insurance rates. CALIFORNIA also bars their use in determining auto policy rates, while MARYLAND prohibits credit-scoring usage for homeowners’ policies. DELAWARE could soon join them as lawmakers recently approved legislation that would bar credit-scoring use for setting renewal rates. That bill now awaits a decision by Gov. Ruth Ann Minner (D).
SNCJ Spotlight
Lenders have long used credit scoring to gauge the worthiness of potential insurance customers. But while states and the courts have taken significant action over the last few years to curb this practice, the issue just won’t go away.
Credit scoring continues to run up legislative tally
What’s in a number? Well, if it happens to be a three-digit figure between 100 and 999 known as a credit score, quite a bit. Lenders have been using credit scoring to gauge the creditworthiness of potential credit card and auto loan customers for decades. More recently, its use has expanded to include not only home mortgage lending but also non-lending matters, most controversially, the setting of insurance rates. Most states have taken action on the issue at some point over the last few years but it still won’t seem to go away. Credit scoring has been around since the late 1950s, when it was invented by the then- CALIFORNIA-based firm Fair Isaac & Company. Now, according to that company, over 90 percent of credit card lenders and more than 75 percent of mortgage lenders use credit scoring to make lending decisions. And the practice is not limited to financial matters alone. Among many others, employers use it to screen job applicants and utility service providers use it to qualify potential customers. The growing pervasiveness of credit scoring has been accompanied by a proliferation of scoring models. While Fair Isaac’s model, the FICO score, which is based on such factors as an individual’s payment history and amount of debt, is the most widely used, many companies have developed their own model tailored to their specific business, which they tend to regard as a company secret. That combination of ubiquity and secretiveness has prompted many of the legislative efforts to regulate credit scoring over the years, such as a measure passed in CALIFORNIA in 2000 (SB 1607), requiring mortgage lenders to disclose detailed credit score information to their customers. “I actually had realtors who were complaining to me about it,” said the bill’s author, former Sen. Liz Figueroa (D). “They told me they were running into more and more situations where clients could either not buy a home because of their credit score or were paying much higher interest rates.” But it’s the insurance industry that has been the target of most of the recent legislative activity on the issue. U.S. insurers began turning from traditional underwriting practices to credit scoring in the late 1990s in an effort to more accurately gauge risk — and thereby reduce cost — in the face of growing competition and ever-increasing claims. The consumption of 20 percent of the world’s reinsurance capacity on 9/11 only accelerated the process. Critics of credit scoring haven’t welcomed the development, charging that it is a completely arbitrary way to assess insurance risk and set rates. Your auto insurance premium, for instance, should depend on your driving record and not on whether or not you pay your bills on time, they argue. They also allege that credit scoring models negatively impact minorities and individuals with low incomes. Insurers counter that there is a close relationship between credit scores and risk. They point to studies like the one by the actuarial firm Tillinghast, which reportedly showed a 99 percent correlation between insurance industry credit scores and what’s known as the loss ratio, the cost of claims filed in relation to dollars paid in premiums. Moreover, the Insurance Information Institute (III) says that more than 50 percent of policyholders actually pay lower premiums because of good credit than they would if their credit information were not considered. The III also reports that there’s no conclusive evidence demonstrating credit scoring adversely impacts low-income and minority populations simply because insurers don’t collect information about applicants’ race or income. States have sought to reconcile those two opposing viewpoints, acknowledging the need to take action but, for the most part, adopting a measured approach. According to the III, 48 states have passed laws restricting the use of credit scoring by insurers, about half of which are based on model legislation developed in 2002 by the National Conference of Insurance Legislators. That model law allows insurers to use credit scoring but not to base rate and other decisions on credit scores alone. It also, among other things, prohibits insurers from including income or ethnicity in their scoring models and requires insurers to notify consumers in “clear and specific language” of the reason for any adverse action, such as denial of coverage or nonrenewal. Only three states have banned insurers from using credit scoring outright. CALIFORNIA prohibits the use of credit scoring for setting auto insurance rates. MARYLAND bars the practice in connection with homeowners’ premiums. And HAWAII has a blanket ban covering both types of insurance. Data compiled by the National Conference of State Legislatures indicates that insurance-related credit scoring peaked as a legislative issue in 2003 (when 42 states introduced 141 bills, 27 of which were passed), dropped off quite a bit the following year (28 states, 58 introductions, 18 passages) and has held fairly steady since. According to State Net’s database, 83 such bills were considered in 31 states this year. “It’s an issue where there’s a lot of concern because it deals with credit,” said Heather Morton, an analyst at NCSL. “It may not be as much of a hot button as it has been, but there’s still a lot of interest in it.” Interest may dwindle somewhat, however, as a result of a U.S. Supreme Court ruling last month in a pair of cases (Safeco Insurance v. Burr and GEICO Insurance v. Edo) involving alleged violations of the federal Fair Credit Reporting Act. The plaintiffs in the cases charged that the two insurers had acted “in willful disregard” of the FCRA by failing to disclose to them that because of their credit scores, they received less favorable rates than other customers. Last year, the 9th U.S. Circuit Court of Appeals ruled in the plaintiffs’ favor, potentially opening up the insurers to billions of dollars in claims from other customers who also had not received adverse action notices. But this month, the Supreme Court, in a unanimous decision, reversed the circuit court ruling, essentially decreeing that companies were not obligated under the FCRA to send out adverse action notices any time a customer was charged more than others, as the 9th had stipulated, only when a customer was charged more than they would have been if their credit score hadn’t been taken into account. The industry had no complaints about the decision. “We are pleased with the ruling and hope it helps put to rest any questions about what constitutes an adverse action notice and when such notices need to be sent,” said Kathleen Jensen, senior legal counsel for Property Casualty Insurers of America. “Thanks to this ruling, insurers now have greater certainty regarding how insurers must comply with the FCRA.” But while that ruling may hasten the decline of insurance-related credit scoring as a legislative issue, it didn’t bring about its immediate demise. A couple of weeks after the Supreme Court handed down its decision, Delaware’s General Assembly passed a bill — SS 1, a substitute for SB 31 — barring insurers from denying coverage or setting premiums for new policies based exclusively on credit information and from canceling coverage or raising the premiums of existing policyholders on the basis of credit information at all. The vote was 19-0 in the Senate (with one senator not voting and another absent) and 41-0 in the House. And at least one of the state’s lawmakers still appears to have some fight left in her on the issue. “This isn’t everything we wanted,” said the bill’s sponsor, Sen. Margaret Rose Henry (D). “I wanted a complete ban. But this is a big step forward, and it’s long overdue.”
(NEWS JOURNAL [WILMINGTON], NATIONAL UNDERWRITER ONLINE NEWS SERVICE, INSURANCE NEWS NET, NCSL.ORG, INSURANCE JOURNAL, FAIRISAAC.COM, ELECTRONIC PRIVACY INFORMATION CENTER, INSURANCE INFORMATION INSTITUTE, STATE NET)
Brondell, a strategic consultant in State Farm’s Strategic Resources Department, also detailed a series of Roundtable recommendations for government and businesses to improve identification and assessment of cyber disruptions, to coordinate responsibilities for Internet reconstitution, and to make needed investments in institutions with critical roles in Internet recoveryBrondell, a strategic consultant in State Farm’s Strategic Resources Department, also detailed a series of Roundtable recommendations for government and businesses to improve identification and assessment of cyber disruptions, to coordinate responsibilities for Internet reconstitution, and to make needed investments in institutions with critical roles in Internet recovery !All the King ,s men
I have seen hundreds if not thousands of scores in the last five years. When I have to advise a 70 year old man that his credit history is “not long enough” or that he has “insufficient gas credit card use”, this has gone too far. Stop the secrets; what’s the score? I,just last week, had a score go up in one week, and of course the premium went up. Two scores in one week and two different prices! This has got to stop!
When a insured with a DWI and good credit has lower rates than a insured with a clean record and bad credit the system is broken. I’ve seen it on many occasions. Defend credit scoring with that example please.
I don’t think anyone could defend premium rating via credit scoring with that example, Tracy.
The whole “company secret” issue in how a score is used bothers me and until there are no more “secrets”, I don’t think credit scoring should be used by the insurance industry in this manner at all.
There’s better data available (driving records, loss ratios, etc.), why not continue using it or find ways to use it more effectively?
KLS – Is there better data available? The vast majority of the population has a clean driving record. Most of an insurer’s book of business has not filed a claim.
Now, there are some issues around scoring that I’m not entirely comfortable with (such as inaccuracies of the credit record), but I’ve seen the predictive power of the score across a large block of policies. (Individual anecdotes hold no weight. You’re not going to get a credible analysis until you have 10-20 thousand policies to look at.)
Every time and underwriter declines or aproves a policy, they are discrinating. They decline people because and accept risks. If someone’s credit score is not enough, they practice credit scorism. If someone does not meet the criteria, they decline. Discimination of risk is the name of the am in the insurance business, we pick and choose who we want based on a qualifying criteria. If you think discrimation is this business is not legal, then welcome to insurance. Next!
So explain away this correlation. This was in today’s news.
Washington drivers who earn a household income of more than $75,000 are more likely than their counterparts to speed and talk on a cell phone, according to data from a poll conducted by PEMCO Insurance Northwest.
“The poll data indicates that there is a correlation between income and driving behavior,” said PEMCO spokesman Jon Osterberg. “Wealthy drivers are taking more safety risks when driving compared to their counterparts.”
KKK? Please explain yourself. Perhaps you do not know the definition of discrimination. Underwriters use it all the time to select qualifying risks. In case you did not know, there is legal discrimination and illegal discimination. Race catagory would be illegal, while credit scoring is legal in many states. I know this get’s you upset, I am just pointing out the truth (perhaps something that is hard for you to swallow).
Tracy,
Insurance companies look to their actuaries for direction, perhaps you can direct this question to such people. Emotional tantrums over this are useless. Hard number, claims payouts, and perhaps premium payment all play a part.
Most people who are offended by credit are people who have bad credit. It sees no race, it is purely based on personal behavior.
I must agree – I think cell phone ownership and use patterns could be more predictive of a claim in the offing than use of a gas card or insurance score. I’d trade. Forget running credit – check cell phone usage.
Should we be surprised? Money talks and the insurance industry has boat loads of it obtained by charging excessive high premiums and/or delaying or denying claims. The industry has so much money they can fund their own research studies to ‘prove’ that credit scoring is actually ‘good’ for consumers (little reminiscent of the tobacco industry having studies to ‘prove’ that cigarettes were not harmful to our health).
I bet if the industry tried real hard and spent enough money they might find other ludicrous correlations. Maybe people born on a Tuesday are more of a risk? Maybe we’ll find that left handers are more risk prone than right handed people. Maybe eye color will prove to be a claim determinant. No doubt with enough money, they will find more correlations.
Credit scoring to set insurance rates in personal lines is offensive amd a sanitized form of discrimination. Maybe someday Congress will have the fortitude to ask the the Fair Isaacs Company to open their little black box and disclose how they arrive at your FICO score. Maybe we will find that their assumptions cloaoked in algorithims is flawed or even discriminatory at its foundation. Maybe someday Congress will set rules with teeth about credit bureaus who maintain inaccurate information or those who report erroneous information to the bureus.
Anyway it was great to hear another legislative success by the industry. The wonders of money.
This isn’t the first time this discussion has been brought up on this site. (it’s too bad you have to wade through the insults to get to some of the better comments)
on another thread i asked the question: “if my credit can be used to determine my premium rate, can the fact that I make every payment on time and haven’t had to pay any claims be used to help my credit?” I ask it here again.
I’m one of those tricky good insurance history/bad credit people (although, i’m completely happy with my insurance rate, etc…). and I understand now that it is the numbers by and large that dictate people with bad credit TEND to have poor insurance histories.
I guess my thoughts now have turned to, “what the heck are people’s auto insurance rates?” I purposefully bought a car that was not considered a sports car, and had 4 doors so I could keep my insurance rates lower. I also bought a car well within my means. AND, I have also combined my renter’s insurance with my auto to get a multi-line discount.
I don’t know….if your rates are that high, in today’s society, can’t you go shopping for a better rate? I had to do that when I first moved to Omaha. At one insurance company it was $140/month, but after looking into it further, I found another insurance company that could give me the same coverage for $80/month (and that’s who I’m currently with).
To you underwriters out there…since my driving record is great, I’ve paid no claims for car accidents, no tickets in the last 3-5 years, but my credit score is less than desirable…would you REALLY expect my rate to increase that much? Wouldn’t the two play off each other a bit and still keep me at a respectable rate?
Why has emotions become more important than the facts? Credit scoring is an income nuatral thing, it doesn’t increase the income of insurance companies. They charge less for people with good credit scores, more for people with not so hot credit scores. The actuaries back it up. Why do we want to protect people with bad credit scores too much? These are people who have shafted society, we have picked up and paid their bills because they could not. If we ran American with emotions, then our country would be long gone. I know your are not going to repond intelligently, so perhaps an insult to me might be more suited for your personality.
SO IF YOU WORK REALY HARD AND PAY ALL YOUR BILL ON TIME AND PAY CASH YES i SAID CASH FOR EVERTHING YOUR POLICY WILL COST MORE? SOMEONE NEEDS TO BE emotional about this?
Are you kidding me Hawaii??? i asked some very good questions and did NOT complain once about the fact that Insurance companies may use credit scores to determine rates! Get over yourself. If your not here to have an intelligent discussion, go home.
If asking if my credit will be counterbalanced by a good insurance history makes me emotional, you are a sorry and mistaken person.
I read your comment again and I still have no idea what the basis for your response is. I said that i understand WHY insurance companies use credit scores…and THAT makes me emotional? ok!
I ask a simple question…bad credit/good insurance history…score should even out, right?
I will cut you some slack on that one….i was looking for intelligent underwriters to comment, not mistaken, incomprehensible people like you.
Underwriters are the wrong people to ask. You need to ask an actuary. I know insurance companies do have problems with people who have lower credit such as non-payment, more claims, etc. I don’t have the numbers, but I beleive it. I used to take cash 10 years ago and stop working with such clients because they would constantly cancel, reinstate, and be nothing but trouble. Perhaps you can do an online search for an actuary and vent your frustrations on that person (and maybe learn something). I just know we have a free market system, and there may be competition that doesn’t do credit scoring. We have choices, no need to get bent out of shape. Good luck buds!
on another thread i asked the question: “if my credit can be used to determine my premium rate, can the fact that I make every payment on time and haven’t had to pay any claims be used to help my credit?” I ask it here again.
i READ ONE TIME IF YOU HAVE SMALL EYES AND A BIG NOISE OR WAS SMALL NOISE –
By: HawaiiDuke888
Comment:
Every time and underwriter declines or aproves a policy, they are discrinating . tHIS IS SO TRUE THE POOR OF mISSISSIPPI WOULD LIKE YOU ALL TO KNOW discrimation is this business is not legal, then welcome to insurance. Next!
Do you have a name? Anyway, Credit is a financial tool and that has an actuarial link. Insurance rates are not based on emotionls, but based on actuaries. It best to research the issue, talk to actuaries so you better understand it. Keep in mind, you have a right disagree, no need to feel ashamed by disagreeing. As far as your good record, that I am sure it taken into the actuarial mix. In the mean time, it’s best to do what you can to repair your credit as to your home loan, insurance and everything else costs more. Just like it doesn’t may to commit crimes, it doesn’t pay to have bad credit. Best of luck. Duke888
so, the “criteria is weighted, proprietary information which insurers are loathe to divulge”
ok: let’s take one word at a time
“weighted” like a bag of cement around the neck (and wallet) of the policy-holder
“proprietary informattion”. Hello-o-o ??
What about FULL DISCLOSURE and the carriers will be compelled under law to reveal their practice of “smoke & mirrors”
….-and did someone say “loathe” ?
So: is it any wonder people dislike our industry for this nonsense
The Commissioners of EACH state allow carriers to present neanderthals and lizzards to sell the product
The worlds richest man laughs all the way to the bank as the policyholders wallet is assaulted !
Give me break !
Look buds, I know you are having problems with this and it is effecting your emotional being. You can continue to be angry or comes to terms with this. My best guess is you are displeased with much of what happens in a free enterprise system. Capitalism probably effects your well being. I don’t know what else I can do to help you. America might not be for you. You have decisions to make. Good luck.
I have many clients that have bad credit scores, that have never filed any Auto and or Homeowners claims, Credit Scoring is only used to increase rates to the people who work hard for a low income that struggles to maintain a meager lifestyle. On the other hand, I also have clients who make significant livings, , who are greater risk takes, speed on the road, and cause more accidents, so just because they have a better ability to pay bills means lower rates, is discriminatory.
Most insurance companies today are stock companies, and profit to the stockholders is what really counts. It is the insurance companies duty in the state they are domiciled in to provide a service to the citizens within that state, and thus to discriminate is illegal.
W.C. – that is so true, they continue to want us to pay their bills and will fight tooth and nail to keep ripping off society. You know, if they knew better, they will realize it is much cheaper to have good credit than to pay higher interest rates, higher insurance rates, and lost job opportunities because of their bad credit. Over a lifetime, it can be hundreds of thousands of dollars of lost wealth! I like to do things the cheaper way by paying every penny I owe!
Like many people, I worked hard to get to where I am today, coming from a middle class family in which I learned to live a decent Moral Life,(in which it seems you have no morality Hawaiiduke), taht you work hard, pay your bills, live a decent life and respect your fellow man/woman irregardless of their socioeconomic status.
In society you have to realize that we will always have the poor, middle class, and extremly wealthy in any given society and they are all necessary to sustain society. If we make it so expensive for the middle class and poor to live such as being able to drive to work, because of high Auto Insurance Premiums, there will be NO INFRASTRUCTURE to use such as roads, buildings, etc. I hire people and pay decent salaries to help me to grow my business as well as helping others grow in there personal financial lives. To me the way that you speak in this forum, are closed minded, and bigoted.
Mike,
I have been very cordial to you and your other monikers (including the ones you left blank). I never resorted to name calling or insults as you have. I know you don’t mean to be a left wing liberal, but you sure come across as one.
Bigoted huh? How do you come to such conclusion, did I even mention race. Please explain as I will give you a fair shot and be open minded to as how you came to such conclusion. Are you open minded? Do you feal being childish is accomplishing anything?
PS. Perhaps you should create a new moniker once again as to part yourself from each damaged moniker you create!
According to the State Net database there
were 81 bills considered in 31 states and
the DELAWARE bill barring certain uses of
credit scores passed the Legislature by an
almost unanimous vote and the Gov is set to
sign the bill….
StateNet Capitol Journal
First of all there is a difference between credit scoring and insurance scoring. Credit scoring measures the liklihood someone will repay debt or other financial abligations, where as insurance scoring measures insurance lost risk.
One’s credit file is not based upon how much they make, rather how they use credit. For example, a person may make $100,000 a year, but open new accounts and use credit in every situation availble.
Also, someone said something about paying their insurance bills and not having claims, or driving violations should affect their insurance rates. Well guess what, they do Insurance Scoring is not the only piece of info that helps calcualte a premium.
Insurance Companies will say that unfortunatley unlike driving vioaltions a person’s credit history does not provide a causal relationship. We know that it works, however we can’t pinpoint exactly why it works.
In the end it is all based upon the law of large numbers and as we all know there are always small exceptions to the rule.
Furthermore, if we were to get rid of insurance scoring, people that are above average risks (less likley to file claims) would pay a higher rate, where as, below average risks (more likley to file claims) would pay a lower rate. Does this make sense for the better risks to subsidize the poor risks? I think not!
Anyone who understands underwriting principals understands that all underwriting criteria group similar risks and exposures. These similar risks are then evaluated to determine the likelihood and severity of loss.
As an example, if someone has 5 speeding violations in the past 3 years, would you assume that they are more likely to have a loss? Chances are, you said yes. However there are enough drivers out there with 5 violations that have never had a loss. Should the use of violation history be baned?
Does a home built in a protection class 10 have a higher potential for loss than a home built in a protection class 3? The statistics say so, yet there are plenty of PC10 homes that have never had a loss.
All that scoring does is to proivide an indicator of the potential for a loss and this has been proven statistically.
Hi DWT – After having “chatted” with other people on this issue (on other threads)…I understand why credit scores are used…and I’m not disputing whether they should or shouldn’t be (despite what HawaiiDuke may or may not decide to read).
My questions stem from the idea that, yes, ok, credit scoring is used to determine insurance rates. Lets say that’s a given…NOW i’m asking how that would counterbalance with a good insurance history (and by good insurance history, I mean, always pay premium on time, no tickets, no claims, no anything, etc…).
I’m more curious, now, about the mathematics behind it…when these rates are put together, where does the emphasis lay? On the credit history, on the insurance history, on the driving history, etc…is it broken down into percentages? For example, 45% of the rate is determined by credit score, 25% is determined by driving history, and 30% is determined by having paid premiums on time and never being dropped by a carrier…etc..
I hope that makes sense! :) I know what I’m trying to ask, but not sure if it’s coming out right.
That is what i’m looking for, NOT an emotional hug and a pat on the back.
The results are used to estimate the risk that someone will file a claim and can dramatically change rates. Rathje’s rates more than doubled over a two-year period.
A lot of insurance companies use one or more multivariate models involving a lot of different characteristics, credit scoring being one of them. For many companies, it’s impossible to say that 45% or 30% of your premium determination is due to credit for every rate quote. But it can be justified extremely well using loss ratios with something like a sequential analysis.
Going back to the original premise of moving violations…
Statistically, people with moving violations are more likely to be involved in an accident. That is not saying that everyone with moving violations will file a loss, but simply people who fall into that group tend to file more losses than people who do not have moving violations.
The same can be said with scoring. Someone may have a poor score and has never been late with their premium and has never filed a claim. It is just that their score puts them into a group where statistically, they are more likely to have a loss.
And this is for all you people who oppose the use of scoring.
This tool and that is all it is, actually lowers more peoples premiums than it increases them. In our research, we show that about 7% of the accounts receive no or minimal credits due to scoring and over 20% are eligible for maximum credits.
We go forward with complete confidence in the eventual triumph of freedom. Not because history runs on the wheels of inevitability; it is human choices that move events. Not because we consider ourselves a chosen nation; God moves and chooses as He wills. We have confidence because freedom is the permanent hope of mankind, the hunger in dark places, the longing of the soul. When our Founders declared a new order of the ages; when soldiers died in wave upon wave for a union based on liberty; when citizens marched in peaceful outrage under the banner “Freedom Now” — they were acting on an ancient hope that is meant to be fulfilled. History has an ebb and flow of justice, but history also has a visible direction, set by liberty and the Author of Liberty
They are always paying late, then one day they turn in a claim and don’t have any coverage. Then they threaten you and you have to turn in a claim to your E&O carrier and pay the 5k deductible. Also, they run into your office at the last minute, pay in cash, take up half hour of your time, you have to go to the bank, etc. Who wants to live that life? Desperate insurance brokers? Maybe you, but certainly not me! Some clients are just not worth it, not worth it to you or the insurance company. The Insurance companies get it, but some brokers don’t!
If valid actuary models qualify me for a lower rate due to my good credit, then GREAT! Why should I be classified and have to pay higher premiums required to handle the risk of those not in my underwriting class?
Aside for the liability models, my insurance company has discriminated against me for years on physical damage coverages. I have never financed my cars yet I have to pay the same premium for comp and collision as the guys who borrow 110% of the car value. Isn’t the guy with the high loan obligation more likely to submit a fraudulant arson claim?
More importantly, most insurance companies agree to provide “single interest” loss payable coverage to lenders at no additional cost to those carrying debt.
Is it really fair to charge me the same physical damage rate, when I do not require lender coverage?
Safeguard us from betrayal! Money, the donor with rank. A protected
agency with no honorable dispute. Safeguard us from betrayal! Money, the donor with rank. A protected
agency with no honorable dispute- Its is all part of the insurance story my friend.
Learn a little bit about the business of insurance and you might find out the vast nummber of people who -have – been harmed. You really have it wrong. I do not hate good insurance companies. I just get sick that State Farm has so much history of harming people. It shows how well they regulate the business. I do know alot about insurance. My husband was in the business for years and I used to go to conventions all over the world. I was proud because I felt my husband worked for a company with ethics. I am just wondering where the ethics are now. I have studied State Farm for over a year, 8-9 hours a day, every day. Reading court documents, etc. So when you say that my story has nothing to do with the article, maybe you are right—and maybe you are wrong. I do know that you can not hide the truth any longer. The American people are too smart for this. I talked to a lady who was paralyzed because State Farm would not pay the PIP. I have had Senator’s offices tell me that insurance is private industry to only then watch C Span and seeing them pass laws that are in force in the Insurance Commissioners offices that will investigate fraud allegedly committed by a consumer but you cannot get anyone in this country to take on State Farm for what they have done. Edward Rust makes 11 million dollars per year. I have read story after story from people that have tried to let this man know how this company is treating people. You are right. I do need help. I really thought that this country was better than selling out to big corporations. I have called every office in Washington, DC and the office of every State Attorney General. I have called the offices of State Insurance Commissioners to no avail. They were organized as consumer protection agencies and have become no better than the beaurocracy that we are fighting against. Believe me, I did not ask for this to happen. All we did was buy a policy and then have a car accident. Then the nightmare began. Every action has a re-action.
Wow, I believe we have a moral and social commitment as brokers and insurance carriers to be the solution not the problem. The biggest problem in every state is the uninsured motorist, and this will not be a solution to this problem. In the end, like the foreclosure problem, giving lower rates to all credit worthy consumers will give unfair lower rates to some that do not deserve it. Then the rates will eventually go up.
Nicely spoken Melanie. Unfortunately, it has nothing to do with the topic as usual. You know nothing about the BUSINESS of insurance. It is a statistically valid and heavily regulated BUSINESS that you, for whatever reason, hate with a passion. Are you aware that this is a BUSINESS? Even our arch enemy, Robert Hunter, knows the purpose we serve, even when we make mistakes. You just hate insurance companies. You make it sound like our BUSINESS is George III and we are oppressing the colonies. Learn a little bit about the BUSINESS of insurance and you might find out the vast number of people we help. You need help.
I’m genuinely sorry for your problems. There are bad stories in any business and you can’t take a few bad instances and paint the entire industry as some sort of criminal enterprise. I have been in the insurance industry for over 30 years and do know quite a bit about how it operates. We have regulators looking over virtually everything we do. Pick any business and you can find individual stories of poor performance. That doesn’t mean we are all bad. I hope you get the help you really need.
Another thought, I don’t pretent to know the circumstances behind your loss problem. However, have you considered that whatever the problem, after all of the people and organizations you have consulted, the company may have been right? Maybe there was no coverage? Maybe your contract with the company didn’t cover what you wanted covered? Just a thought from someone without any knowledge of the actual problem. Insurance is a contract and needs to be treated as one.
At what point do you look at any situation and say, maybe I’m wrong and they’re right. I say this not having any knowledge of your situation. But if you have gone to the extent you say, maybe you need to move on. Again, whatever your loss may be, I’m sorry, but you need to look at the entire situation and decide for yourself. Ranting at us insurance people over and over isn’t solving a thing. We aren’t an evil industry full of evil people. We are like any other business, full of mostly good people and a few bad ones. We hope that the bad ones can be weeded out and punished. Move on to other options. You just are not doing any good at this point.
Just a thought from someone without any knowledge of the actual problem. Insurance Regulated BUSINESS We hope that the bad ones can be weeded out and punished. Move on to other options. You just are not doing any good at this point.
Say who you! Have you no clue! State Farm has wasted so much of the Policy holders money. For the games they have you all play. If you are not one of this people marvelous than God bless you If you are you need to get a clue. This is not a game to me. Go the extra mile for my regulated way.
Read my post again. I said that I don’t know the situation. Also, if you assume that this situation is indicative of insurance people and companies in general you are a moron. Is that simple enough for you to understand?
In 2002 a federal trial judge allowed the suit to proceed. The court rejected Allstate’s argument and determined that the states at issue (Texas and Florida) had not yet enacted regulations governing credit scoring so plaintiffs could look to federal law and courts. In addition, this court noted that federal courts have held that the McCarran-Ferguson Act does not preclude racial discrimination suits, even where states have enacted insurance and anti-discrimination statutes.
In September, 2003, the U.S. Court of Appeals for the Fifth Circuit in New Orleans affirmed the decision to deny Allstate’s motion to dismiss.
With this latest Supreme Court affirmation, the case now proceeds to trial on its merits.
If your customer pays their Sears card late then they will file lots more claims than if they pay their Sears card on time. It must be true because that is what they say. So there we have it.
We cannot send a message to people who choose not to pay the bills as if it okay what they had done (along with related behavior paterns). I think the best agencies weed out who they will and won’t insure. Of course, there will always be an agency who specializes in this type of business, often a newcomer who will write anything. I guess there is nothing wrong with getting practice and perhaps this type of client is good practice. But they also need to realize that people are not going to take them seriously if they are not the type of people who meet their obligations. In other words, they can’t be trusted (and the history says that). A combination of perhaps paying more money for their insurance as well as learning they are not the most desirable client sends a strong message that they need to cut their act. They need to change their behaviors as to make themselves more desirable clients. Remember, we pretend like credit is not their fault and that they did not have control over it. Don’t be fooled, these people are who they are. If we treat them like their credit is a non-issue would tell them that they can keep practicing their ways.
I know many people are going to point out the credit score is a form of racism. I will explain why do they even say such thing and how they link credit to race.
Here is why….
Some people associate Hispanic, African-Americans, other minorities to people who are not intelligent, not responsible and not capable of getting high credit scores. I refuse to insult any minority of such silliness, and perhaps even racist.
Why do they pretend that Hispanics are a nobody? Why do they think Hispanics are low income earners? Why do they think Hispanics are not Doctors, Lawyers, Engineers, CPAs and many other high paying professions? Is this insulting or what? Of course it is!
It is time we end labeling certain minorities and judge them for the content of the character and certainly not the color of their skin.
That is the promise of catastrophe models like RMS’. And it’s the promise of new “data-mining” methods that let companies use a person’s income, education or ZIP code to predict future claims. That in turn encourages insurers to raise rates or refuse coverage for the very people who need it most — low- and moderate-income families, for example, or those who’ve suffered such setbacks as unemployment
This is probably useless, but I will give this a try. Insurance is once again a BUSINESS, not a charity. The company statistically determines who will have the most losses and either charges them the rate appropriate to the exposure or doesn’t write them. If these individuals have a statistically proven higher chance of loss they must pay more money or they can’t have the coverage. Yes, there is a profit. A company has to turn a profit. If you think goverment can provide the coverge better wait until the big one hits Florida and see what happens. Study the purpose of insurance and how it has to work. It’s just another business and one that provides a good service dispite your stated opinions.
If it we up to me and my Berkeley clan, I would make it illegal for anyone to make a profit. Of course my brain is so fried on drugs, so I don’t understand the implications of someone not making a profit. I just want my free paycheck.
Missouri Jury Tells State Farm to Pay Up
By Dave Thomas
September 5, 2005
A Kansas City jury recently had some bad news for one of the nation’s top insurers in deliberations that reportedly took less than six hours. The message to State Farm–pay up.
Five former State Farm Ins-urance agents were awarded $20 million by the jury that decided the agents were improperly terminated for being critical of the way the insurer reportedly treated its policyholders.
Tana Glockner, Joseph J. Kelly, Clifford F. Lykke, Michael Lee Morgan and Lee P. Saghirian, whose contracts were terminated in January 2000, were awarded $9 million in actual damages and $11 million in punitive damages. The five, who reportedly had more than 100 years of collective experience with State Farm, had spoken out in the fall of 1999 against the company, saying there was a need for change in State Farm’s management structure.
In late 1999, the five agents gave permission to use their names in a letter to the Texas insurance commissioner that was critical of State Farm’s treatment of policyholders.
Among the allegations were that the insurer charged extra for homeowners insurance, tried to defraud accident victims from full compensation and permitted sales discrimination to occur at the company. Glockner and Morgan had already given permission for their names to be signed to a letter to the Senate Commerce Committee and had participated in a Washington news conference.
A lawyer for the plaintiffs noted that at the heart of the Missouri case, was determining whether the insurer could fire an agent for going public to protect policyholder interests. He added that during the mid-1990s, there were a number of verdicts and settlements in which the insurer was discovered to have treated policyholders unfairly in a variety of different ways.
State Farm Director of External Relations, Phil Supple, told Insurance Journal that the company was obviously disappointed with the jury’s decision. “We believe our actions were appropriate, and we do not believe the verdict is supported by the evidence presented at trial,” Supple said. “We will reflect on the verdict and explore our options.”
A company has to turn a profit- A company like State Farm makes so munch. Think of the money this compay waste. Put all of this together they say we all committ fraud. Come on we need charity we all pay for this crap. Read all the documents of abuses by the Ins compay it makes you Nobody Important to them so do not need the help you paid for.
I am so sick of the idiots who comment on this site with no concept of the good done by insurance companies. They take a few bad instances out of millions of claims and turn our good work into some kind of criminal enterprise. You comment on things you are too stupid to understand. I’m sorry for the bitterness in this post, but I’m just fed up with people posting on this site. As has been said so many times before, if you can do it better, start your own company. Better yet, try to do without insurance. This was a professional insurance site some time ago before the nutters found it. Go away.
The bill of rights was summarily executed during the state Legislative session, but Buckel’s not giving up. He said he has 10,000 e-mail supporters. Learn more about the bill of rights at msbillofrights.com. You can also go there to send him your insurance horror stories. Yes, he’s collecting them to help in his effort with the bill.
“The insurance companies hire attorneys to put language in their policies so they don’t have to pay our claims,” Buckel said. “We need Legislators to give us a bill of rights to protect us.”
I forgot to mention that State Net database lists 47 states that are going to do away with DUI (DWI) surcharge and make it law that insurance companies can no longer increase rates due DUI activity. The Governors of each state will sign this into law.
The state regulators are cluesless when it comes to understanding the complex insurance score models used by insurers. I would like to see one state regulator explain a model.
Bad Credit = Bad Risk = People who rip off society = No personal responsibility = poor employees = people who will take advantage of you
Yes, there are exceptions to the rule, such as medical reasons, however if these people had proper insurance and proper life management (savings, etc) they would never have credit problems.
***This is from the most recent issue of the State Net Capitol Journal. Lots of info, may be difficult to read. Copied and pasted from a .pdf, sorry for the eye strain.***
States debate insurers’ use of credit scoring
The insurance industry has long believed there is a direct correlation between a person’s credit history and the likelihood they will file an insurance claim. As such, insurers regularly use consumer credit scores to help establish rates. But consumer groups vehemently oppose the practice, saying it discriminates against the poor and minorities. The debate has resulted in a plethora of bills seeking to end the use of credit scoring in insurance every year since 2002, including 83 this year. But to date, only HAWAII has completely banned the use of credit scores in determining insurance rates. CALIFORNIA also bars their use in determining auto policy rates, while MARYLAND prohibits credit-scoring usage for homeowners’ policies. DELAWARE could soon join them as lawmakers recently approved legislation that would bar credit-scoring use for setting renewal rates. That bill now awaits a decision by Gov. Ruth Ann Minner (D).
SNCJ Spotlight
Lenders have long used credit scoring to gauge the worthiness of potential insurance customers. But while states and the courts have taken significant action over the last few years to curb this practice, the issue just won’t go away.
Credit scoring continues to run up legislative tally
What’s in a number? Well, if it happens to be a three-digit figure between 100 and 999 known as a credit score, quite a bit. Lenders have been using credit scoring to gauge the creditworthiness of potential credit card and auto loan customers for decades. More recently, its use has expanded to include not only home mortgage lending but also non-lending matters, most controversially, the setting of insurance rates. Most states have taken action on the issue at some point over the last few years but it still won’t seem to go away. Credit scoring has been around since the late 1950s, when it was invented by the then- CALIFORNIA-based firm Fair Isaac & Company. Now, according to that company, over 90 percent of credit card lenders and more than 75 percent of mortgage lenders use credit scoring to make lending decisions. And the practice is not limited to financial matters alone. Among many others, employers use it to screen job applicants and utility service providers use it to qualify potential customers. The growing pervasiveness of credit scoring has been accompanied by a proliferation of scoring models. While Fair Isaac’s model, the FICO score, which is based on such factors as an individual’s payment history and amount of debt, is the most widely used, many companies have developed their own model tailored to their specific business, which they tend to regard as a company secret. That combination of ubiquity and secretiveness has prompted many of the legislative efforts to regulate credit scoring over the years, such as a measure passed in CALIFORNIA in 2000 (SB 1607), requiring mortgage lenders to disclose detailed credit score information to their customers. “I actually had realtors who were complaining to me about it,” said the bill’s author, former Sen. Liz Figueroa (D). “They told me they were running into more and more situations where clients could either not buy a home because of their credit score or were paying much higher interest rates.” But it’s the insurance industry that has been the target of most of the recent legislative activity on the issue. U.S. insurers began turning from traditional underwriting practices to credit scoring in the late 1990s in an effort to more accurately gauge risk — and thereby reduce cost — in the face of growing competition and ever-increasing claims. The consumption of 20 percent of the world’s reinsurance capacity on 9/11 only accelerated the process. Critics of credit scoring haven’t welcomed the development, charging that it is a completely arbitrary way to assess insurance risk and set rates. Your auto insurance premium, for instance, should depend on your driving record and not on whether or not you pay your bills on time, they argue. They also allege that credit scoring models negatively impact minorities and individuals with low incomes. Insurers counter that there is a close relationship between credit scores and risk. They point to studies like the one by the actuarial firm Tillinghast, which reportedly showed a 99 percent correlation between insurance industry credit scores and what’s known as the loss ratio, the cost of claims filed in relation to dollars paid in premiums. Moreover, the Insurance Information Institute (III) says that more than 50 percent of policyholders actually pay lower premiums because of good credit than they would if their credit information were not considered. The III also reports that there’s no conclusive evidence demonstrating credit scoring adversely impacts low-income and minority populations simply because insurers don’t collect information about applicants’ race or income. States have sought to reconcile those two opposing viewpoints, acknowledging the need to take action but, for the most part, adopting a measured approach. According to the III, 48 states have passed laws restricting the use of credit scoring by insurers, about half of which are based on model legislation developed in 2002 by the National Conference of Insurance Legislators. That model law allows insurers to use credit scoring but not to base rate and other decisions on credit scores alone. It also, among other things, prohibits insurers from including income or ethnicity in their scoring models and requires insurers to notify consumers in “clear and specific language” of the reason for any adverse action, such as denial of coverage or nonrenewal. Only three states have banned insurers from using credit scoring outright. CALIFORNIA prohibits the use of credit scoring for setting auto insurance rates. MARYLAND bars the practice in connection with homeowners’ premiums. And HAWAII has a blanket ban covering both types of insurance. Data compiled by the National Conference of State Legislatures indicates that insurance-related credit scoring peaked as a legislative issue in 2003 (when 42 states introduced 141 bills, 27 of which were passed), dropped off quite a bit the following year (28 states, 58 introductions, 18 passages) and has held fairly steady since. According to State Net’s database, 83 such bills were considered in 31 states this year. “It’s an issue where there’s a lot of concern because it deals with credit,” said Heather Morton, an analyst at NCSL. “It may not be as much of a hot button as it has been, but there’s still a lot of interest in it.” Interest may dwindle somewhat, however, as a result of a U.S. Supreme Court ruling last month in a pair of cases (Safeco Insurance v. Burr and GEICO Insurance v. Edo) involving alleged violations of the federal Fair Credit Reporting Act. The plaintiffs in the cases charged that the two insurers had acted “in willful disregard” of the FCRA by failing to disclose to them that because of their credit scores, they received less favorable rates than other customers. Last year, the 9th U.S. Circuit Court of Appeals ruled in the plaintiffs’ favor, potentially opening up the insurers to billions of dollars in claims from other customers who also had not received adverse action notices. But this month, the Supreme Court, in a unanimous decision, reversed the circuit court ruling, essentially decreeing that companies were not obligated under the FCRA to send out adverse action notices any time a customer was charged more than others, as the 9th had stipulated, only when a customer was charged more than they would have been if their credit score hadn’t been taken into account. The industry had no complaints about the decision. “We are pleased with the ruling and hope it helps put to rest any questions about what constitutes an adverse action notice and when such notices need to be sent,” said Kathleen Jensen, senior legal counsel for Property Casualty Insurers of America. “Thanks to this ruling, insurers now have greater certainty regarding how insurers must comply with the FCRA.” But while that ruling may hasten the decline of insurance-related credit scoring as a legislative issue, it didn’t bring about its immediate demise. A couple of weeks after the Supreme Court handed down its decision, Delaware’s General Assembly passed a bill — SS 1, a substitute for SB 31 — barring insurers from denying coverage or setting premiums for new policies based exclusively on credit information and from canceling coverage or raising the premiums of existing policyholders on the basis of credit information at all. The vote was 19-0 in the Senate (with one senator not voting and another absent) and 41-0 in the House. And at least one of the state’s lawmakers still appears to have some fight left in her on the issue. “This isn’t everything we wanted,” said the bill’s sponsor, Sen. Margaret Rose Henry (D). “I wanted a complete ban. But this is a big step forward, and it’s long overdue.”
(NEWS JOURNAL [WILMINGTON], NATIONAL UNDERWRITER ONLINE NEWS SERVICE, INSURANCE NEWS NET, NCSL.ORG, INSURANCE JOURNAL, FAIRISAAC.COM, ELECTRONIC PRIVACY INFORMATION CENTER, INSURANCE INFORMATION INSTITUTE, STATE NET)
— Compiled by KOREY CLARK
Brondell, a strategic consultant in State Farm’s Strategic Resources Department, also detailed a series of Roundtable recommendations for government and businesses to improve identification and assessment of cyber disruptions, to coordinate responsibilities for Internet reconstitution, and to make needed investments in institutions with critical roles in Internet recoveryBrondell, a strategic consultant in State Farm’s Strategic Resources Department, also detailed a series of Roundtable recommendations for government and businesses to improve identification and assessment of cyber disruptions, to coordinate responsibilities for Internet reconstitution, and to make needed investments in institutions with critical roles in Internet recovery !All the King ,s men
I have seen hundreds if not thousands of scores in the last five years. When I have to advise a 70 year old man that his credit history is “not long enough” or that he has “insufficient gas credit card use”, this has gone too far. Stop the secrets; what’s the score? I,just last week, had a score go up in one week, and of course the premium went up. Two scores in one week and two different prices! This has got to stop!
Umm Jeanette, normally when someones score goes up, the premium decreases. Are you sure you are knowledgable on this topic??
When a insured with a DWI and good credit has lower rates than a insured with a clean record and bad credit the system is broken. I’ve seen it on many occasions. Defend credit scoring with that example please.
I don’t think anyone could defend premium rating via credit scoring with that example, Tracy.
The whole “company secret” issue in how a score is used bothers me and until there are no more “secrets”, I don’t think credit scoring should be used by the insurance industry in this manner at all.
There’s better data available (driving records, loss ratios, etc.), why not continue using it or find ways to use it more effectively?
KLS – Is there better data available? The vast majority of the population has a clean driving record. Most of an insurer’s book of business has not filed a claim.
Now, there are some issues around scoring that I’m not entirely comfortable with (such as inaccuracies of the credit record), but I’ve seen the predictive power of the score across a large block of policies. (Individual anecdotes hold no weight. You’re not going to get a credible analysis until you have 10-20 thousand policies to look at.)
Every time and underwriter declines or aproves a policy, they are discrinating. They decline people because and accept risks. If someone’s credit score is not enough, they practice credit scorism. If someone does not meet the criteria, they decline. Discimination of risk is the name of the am in the insurance business, we pick and choose who we want based on a qualifying criteria. If you think discrimation is this business is not legal, then welcome to insurance. Next!
Wow, I had no idea the KKK has a Chapter in Hawaii. Do you all wear lei’s with your white hood?
So explain away this correlation. This was in today’s news.
Washington drivers who earn a household income of more than $75,000 are more likely than their counterparts to speed and talk on a cell phone, according to data from a poll conducted by PEMCO Insurance Northwest.
“The poll data indicates that there is a correlation between income and driving behavior,” said PEMCO spokesman Jon Osterberg. “Wealthy drivers are taking more safety risks when driving compared to their counterparts.”
KKK? Please explain yourself. Perhaps you do not know the definition of discrimination. Underwriters use it all the time to select qualifying risks. In case you did not know, there is legal discrimination and illegal discimination. Race catagory would be illegal, while credit scoring is legal in many states. I know this get’s you upset, I am just pointing out the truth (perhaps something that is hard for you to swallow).
Tracy,
Insurance companies look to their actuaries for direction, perhaps you can direct this question to such people. Emotional tantrums over this are useless. Hard number, claims payouts, and perhaps premium payment all play a part.
Most people who are offended by credit are people who have bad credit. It sees no race, it is purely based on personal behavior.
I must agree – I think cell phone ownership and use patterns could be more predictive of a claim in the offing than use of a gas card or insurance score. I’d trade. Forget running credit – check cell phone usage.
Should we be surprised? Money talks and the insurance industry has boat loads of it obtained by charging excessive high premiums and/or delaying or denying claims. The industry has so much money they can fund their own research studies to ‘prove’ that credit scoring is actually ‘good’ for consumers (little reminiscent of the tobacco industry having studies to ‘prove’ that cigarettes were not harmful to our health).
I bet if the industry tried real hard and spent enough money they might find other ludicrous correlations. Maybe people born on a Tuesday are more of a risk? Maybe we’ll find that left handers are more risk prone than right handed people. Maybe eye color will prove to be a claim determinant. No doubt with enough money, they will find more correlations.
Credit scoring to set insurance rates in personal lines is offensive amd a sanitized form of discrimination. Maybe someday Congress will have the fortitude to ask the the Fair Isaacs Company to open their little black box and disclose how they arrive at your FICO score. Maybe we will find that their assumptions cloaoked in algorithims is flawed or even discriminatory at its foundation. Maybe someday Congress will set rules with teeth about credit bureaus who maintain inaccurate information or those who report erroneous information to the bureus.
Anyway it was great to hear another legislative success by the industry. The wonders of money.
This isn’t the first time this discussion has been brought up on this site. (it’s too bad you have to wade through the insults to get to some of the better comments)
on another thread i asked the question: “if my credit can be used to determine my premium rate, can the fact that I make every payment on time and haven’t had to pay any claims be used to help my credit?” I ask it here again.
I’m one of those tricky good insurance history/bad credit people (although, i’m completely happy with my insurance rate, etc…). and I understand now that it is the numbers by and large that dictate people with bad credit TEND to have poor insurance histories.
I guess my thoughts now have turned to, “what the heck are people’s auto insurance rates?” I purposefully bought a car that was not considered a sports car, and had 4 doors so I could keep my insurance rates lower. I also bought a car well within my means. AND, I have also combined my renter’s insurance with my auto to get a multi-line discount.
I don’t know….if your rates are that high, in today’s society, can’t you go shopping for a better rate? I had to do that when I first moved to Omaha. At one insurance company it was $140/month, but after looking into it further, I found another insurance company that could give me the same coverage for $80/month (and that’s who I’m currently with).
To you underwriters out there…since my driving record is great, I’ve paid no claims for car accidents, no tickets in the last 3-5 years, but my credit score is less than desirable…would you REALLY expect my rate to increase that much? Wouldn’t the two play off each other a bit and still keep me at a respectable rate?
Why has emotions become more important than the facts? Credit scoring is an income nuatral thing, it doesn’t increase the income of insurance companies. They charge less for people with good credit scores, more for people with not so hot credit scores. The actuaries back it up. Why do we want to protect people with bad credit scores too much? These are people who have shafted society, we have picked up and paid their bills because they could not. If we ran American with emotions, then our country would be long gone. I know your are not going to repond intelligently, so perhaps an insult to me might be more suited for your personality.
SO IF YOU WORK REALY HARD AND PAY ALL YOUR BILL ON TIME AND PAY CASH YES i SAID CASH FOR EVERTHING YOUR POLICY WILL COST MORE? SOMEONE NEEDS TO BE emotional about this?
Are you kidding me Hawaii??? i asked some very good questions and did NOT complain once about the fact that Insurance companies may use credit scores to determine rates! Get over yourself. If your not here to have an intelligent discussion, go home.
If asking if my credit will be counterbalanced by a good insurance history makes me emotional, you are a sorry and mistaken person.
I read your comment again and I still have no idea what the basis for your response is. I said that i understand WHY insurance companies use credit scores…and THAT makes me emotional? ok!
I ask a simple question…bad credit/good insurance history…score should even out, right?
I will cut you some slack on that one….i was looking for intelligent underwriters to comment, not mistaken, incomprehensible people like you.
Underwriters are the wrong people to ask. You need to ask an actuary. I know insurance companies do have problems with people who have lower credit such as non-payment, more claims, etc. I don’t have the numbers, but I beleive it. I used to take cash 10 years ago and stop working with such clients because they would constantly cancel, reinstate, and be nothing but trouble. Perhaps you can do an online search for an actuary and vent your frustrations on that person (and maybe learn something). I just know we have a free market system, and there may be competition that doesn’t do credit scoring. We have choices, no need to get bent out of shape. Good luck buds!
on another thread i asked the question: “if my credit can be used to determine my premium rate, can the fact that I make every payment on time and haven’t had to pay any claims be used to help my credit?” I ask it here again.
i READ ONE TIME IF YOU HAVE SMALL EYES AND A BIG NOISE OR WAS SMALL NOISE –
By: HawaiiDuke888
Comment:
Every time and underwriter declines or aproves a policy, they are discrinating . tHIS IS SO TRUE THE POOR OF mISSISSIPPI WOULD LIKE YOU ALL TO KNOW discrimation is this business is not legal, then welcome to insurance. Next!
Do you have a name? Anyway, Credit is a financial tool and that has an actuarial link. Insurance rates are not based on emotionls, but based on actuaries. It best to research the issue, talk to actuaries so you better understand it. Keep in mind, you have a right disagree, no need to feel ashamed by disagreeing. As far as your good record, that I am sure it taken into the actuarial mix. In the mean time, it’s best to do what you can to repair your credit as to your home loan, insurance and everything else costs more. Just like it doesn’t may to commit crimes, it doesn’t pay to have bad credit. Best of luck. Duke888
so, the “criteria is weighted, proprietary information which insurers are loathe to divulge”
ok: let’s take one word at a time
“weighted” like a bag of cement around the neck (and wallet) of the policy-holder
“proprietary informattion”. Hello-o-o ??
What about FULL DISCLOSURE and the carriers will be compelled under law to reveal their practice of “smoke & mirrors”
….-and did someone say “loathe” ?
So: is it any wonder people dislike our industry for this nonsense
The Commissioners of EACH state allow carriers to present neanderthals and lizzards to sell the product
The worlds richest man laughs all the way to the bank as the policyholders wallet is assaulted !
Give me break !
The only people that don’t like credit scoring are those of us with the crappola credit.
Look buds, I know you are having problems with this and it is effecting your emotional being. You can continue to be angry or comes to terms with this. My best guess is you are displeased with much of what happens in a free enterprise system. Capitalism probably effects your well being. I don’t know what else I can do to help you. America might not be for you. You have decisions to make. Good luck.
I have many clients that have bad credit scores, that have never filed any Auto and or Homeowners claims, Credit Scoring is only used to increase rates to the people who work hard for a low income that struggles to maintain a meager lifestyle. On the other hand, I also have clients who make significant livings, , who are greater risk takes, speed on the road, and cause more accidents, so just because they have a better ability to pay bills means lower rates, is discriminatory.
Most insurance companies today are stock companies, and profit to the stockholders is what really counts. It is the insurance companies duty in the state they are domiciled in to provide a service to the citizens within that state, and thus to discriminate is illegal.
W.C. – that is so true, they continue to want us to pay their bills and will fight tooth and nail to keep ripping off society. You know, if they knew better, they will realize it is much cheaper to have good credit than to pay higher interest rates, higher insurance rates, and lost job opportunities because of their bad credit. Over a lifetime, it can be hundreds of thousands of dollars of lost wealth! I like to do things the cheaper way by paying every penny I owe!
Mike,
The second I see you give up your income (and/or income from investments) is the second I will not call you a hypocrite.
Like many people, I worked hard to get to where I am today, coming from a middle class family in which I learned to live a decent Moral Life,(in which it seems you have no morality Hawaiiduke), taht you work hard, pay your bills, live a decent life and respect your fellow man/woman irregardless of their socioeconomic status.
In society you have to realize that we will always have the poor, middle class, and extremly wealthy in any given society and they are all necessary to sustain society. If we make it so expensive for the middle class and poor to live such as being able to drive to work, because of high Auto Insurance Premiums, there will be NO INFRASTRUCTURE to use such as roads, buildings, etc. I hire people and pay decent salaries to help me to grow my business as well as helping others grow in there personal financial lives. To me the way that you speak in this forum, are closed minded, and bigoted.
Mike,
I have been very cordial to you and your other monikers (including the ones you left blank). I never resorted to name calling or insults as you have. I know you don’t mean to be a left wing liberal, but you sure come across as one.
Bigoted huh? How do you come to such conclusion, did I even mention race. Please explain as I will give you a fair shot and be open minded to as how you came to such conclusion. Are you open minded? Do you feal being childish is accomplishing anything?
PS. Perhaps you should create a new moniker once again as to part yourself from each damaged moniker you create!
According to the State Net database there
were 81 bills considered in 31 states and
the DELAWARE bill barring certain uses of
credit scores passed the Legislature by an
almost unanimous vote and the Gov is set to
sign the bill….
StateNet Capitol Journal
First of all there is a difference between credit scoring and insurance scoring. Credit scoring measures the liklihood someone will repay debt or other financial abligations, where as insurance scoring measures insurance lost risk.
One’s credit file is not based upon how much they make, rather how they use credit. For example, a person may make $100,000 a year, but open new accounts and use credit in every situation availble.
Also, someone said something about paying their insurance bills and not having claims, or driving violations should affect their insurance rates. Well guess what, they do Insurance Scoring is not the only piece of info that helps calcualte a premium.
Insurance Companies will say that unfortunatley unlike driving vioaltions a person’s credit history does not provide a causal relationship. We know that it works, however we can’t pinpoint exactly why it works.
In the end it is all based upon the law of large numbers and as we all know there are always small exceptions to the rule.
Furthermore, if we were to get rid of insurance scoring, people that are above average risks (less likley to file claims) would pay a higher rate, where as, below average risks (more likley to file claims) would pay a lower rate. Does this make sense for the better risks to subsidize the poor risks? I think not!
Anyone who understands underwriting principals understands that all underwriting criteria group similar risks and exposures. These similar risks are then evaluated to determine the likelihood and severity of loss.
As an example, if someone has 5 speeding violations in the past 3 years, would you assume that they are more likely to have a loss? Chances are, you said yes. However there are enough drivers out there with 5 violations that have never had a loss. Should the use of violation history be baned?
Does a home built in a protection class 10 have a higher potential for loss than a home built in a protection class 3? The statistics say so, yet there are plenty of PC10 homes that have never had a loss.
All that scoring does is to proivide an indicator of the potential for a loss and this has been proven statistically.
Yeah – I know, number lie!
Hi DWT – After having “chatted” with other people on this issue (on other threads)…I understand why credit scores are used…and I’m not disputing whether they should or shouldn’t be (despite what HawaiiDuke may or may not decide to read).
My questions stem from the idea that, yes, ok, credit scoring is used to determine insurance rates. Lets say that’s a given…NOW i’m asking how that would counterbalance with a good insurance history (and by good insurance history, I mean, always pay premium on time, no tickets, no claims, no anything, etc…).
I’m more curious, now, about the mathematics behind it…when these rates are put together, where does the emphasis lay? On the credit history, on the insurance history, on the driving history, etc…is it broken down into percentages? For example, 45% of the rate is determined by credit score, 25% is determined by driving history, and 30% is determined by having paid premiums on time and never being dropped by a carrier…etc..
I hope that makes sense! :) I know what I’m trying to ask, but not sure if it’s coming out right.
That is what i’m looking for, NOT an emotional hug and a pat on the back.
Coverages:
“All Risks” property damage
Machinery breakdown
Business interruption
Contact our underwriters to learn more:
not for the poor?$
The results are used to estimate the risk that someone will file a claim and can dramatically change rates. Rathje’s rates more than doubled over a two-year period.
Exactly what
??
Nebraskan,
A lot of insurance companies use one or more multivariate models involving a lot of different characteristics, credit scoring being one of them. For many companies, it’s impossible to say that 45% or 30% of your premium determination is due to credit for every rate quote. But it can be justified extremely well using loss ratios with something like a sequential analysis.
I appreciate the information!
That’s the fun of this game.
Going back to the original premise of moving violations…
Statistically, people with moving violations are more likely to be involved in an accident. That is not saying that everyone with moving violations will file a loss, but simply people who fall into that group tend to file more losses than people who do not have moving violations.
The same can be said with scoring. Someone may have a poor score and has never been late with their premium and has never filed a claim. It is just that their score puts them into a group where statistically, they are more likely to have a loss.
Sorry I could not provide a better answer.
And this is for all you people who oppose the use of scoring.
This tool and that is all it is, actually lowers more peoples premiums than it increases them. In our research, we show that about 7% of the accounts receive no or minimal credits due to scoring and over 20% are eligible for maximum credits.
We go forward with complete confidence in the eventual triumph of freedom. Not because history runs on the wheels of inevitability; it is human choices that move events. Not because we consider ourselves a chosen nation; God moves and chooses as He wills. We have confidence because freedom is the permanent hope of mankind, the hunger in dark places, the longing of the soul. When our Founders declared a new order of the ages; when soldiers died in wave upon wave for a union based on liberty; when citizens marched in peaceful outrage under the banner “Freedom Now” — they were acting on an ancient hope that is meant to be fulfilled. History has an ebb and flow of justice, but history also has a visible direction, set by liberty and the Author of Liberty
They are always paying late, then one day they turn in a claim and don’t have any coverage. Then they threaten you and you have to turn in a claim to your E&O carrier and pay the 5k deductible. Also, they run into your office at the last minute, pay in cash, take up half hour of your time, you have to go to the bank, etc. Who wants to live that life? Desperate insurance brokers? Maybe you, but certainly not me! Some clients are just not worth it, not worth it to you or the insurance company. The Insurance companies get it, but some brokers don’t!
If valid actuary models qualify me for a lower rate due to my good credit, then GREAT! Why should I be classified and have to pay higher premiums required to handle the risk of those not in my underwriting class?
Aside for the liability models, my insurance company has discriminated against me for years on physical damage coverages. I have never financed my cars yet I have to pay the same premium for comp and collision as the guys who borrow 110% of the car value. Isn’t the guy with the high loan obligation more likely to submit a fraudulant arson claim?
More importantly, most insurance companies agree to provide “single interest” loss payable coverage to lenders at no additional cost to those carrying debt.
Is it really fair to charge me the same physical damage rate, when I do not require lender coverage?
Safeguard us from betrayal! Money, the donor with rank. A protected
agency with no honorable dispute. Safeguard us from betrayal! Money, the donor with rank. A protected
agency with no honorable dispute- Its is all part of the insurance story my friend.
Learn a little bit about the business of insurance and you might find out the vast nummber of people who -have – been harmed. You really have it wrong. I do not hate good insurance companies. I just get sick that State Farm has so much history of harming people. It shows how well they regulate the business. I do know alot about insurance. My husband was in the business for years and I used to go to conventions all over the world. I was proud because I felt my husband worked for a company with ethics. I am just wondering where the ethics are now. I have studied State Farm for over a year, 8-9 hours a day, every day. Reading court documents, etc. So when you say that my story has nothing to do with the article, maybe you are right—and maybe you are wrong. I do know that you can not hide the truth any longer. The American people are too smart for this. I talked to a lady who was paralyzed because State Farm would not pay the PIP. I have had Senator’s offices tell me that insurance is private industry to only then watch C Span and seeing them pass laws that are in force in the Insurance Commissioners offices that will investigate fraud allegedly committed by a consumer but you cannot get anyone in this country to take on State Farm for what they have done. Edward Rust makes 11 million dollars per year. I have read story after story from people that have tried to let this man know how this company is treating people. You are right. I do need help. I really thought that this country was better than selling out to big corporations. I have called every office in Washington, DC and the office of every State Attorney General. I have called the offices of State Insurance Commissioners to no avail. They were organized as consumer protection agencies and have become no better than the beaurocracy that we are fighting against. Believe me, I did not ask for this to happen. All we did was buy a policy and then have a car accident. Then the nightmare began. Every action has a re-action.
Wow, I believe we have a moral and social commitment as brokers and insurance carriers to be the solution not the problem. The biggest problem in every state is the uninsured motorist, and this will not be a solution to this problem. In the end, like the foreclosure problem, giving lower rates to all credit worthy consumers will give unfair lower rates to some that do not deserve it. Then the rates will eventually go up.
Nicely spoken Melanie. Unfortunately, it has nothing to do with the topic as usual. You know nothing about the BUSINESS of insurance. It is a statistically valid and heavily regulated BUSINESS that you, for whatever reason, hate with a passion. Are you aware that this is a BUSINESS? Even our arch enemy, Robert Hunter, knows the purpose we serve, even when we make mistakes. You just hate insurance companies. You make it sound like our BUSINESS is George III and we are oppressing the colonies. Learn a little bit about the BUSINESS of insurance and you might find out the vast number of people we help. You need help.
I’m genuinely sorry for your problems. There are bad stories in any business and you can’t take a few bad instances and paint the entire industry as some sort of criminal enterprise. I have been in the insurance industry for over 30 years and do know quite a bit about how it operates. We have regulators looking over virtually everything we do. Pick any business and you can find individual stories of poor performance. That doesn’t mean we are all bad. I hope you get the help you really need.
Another thought, I don’t pretent to know the circumstances behind your loss problem. However, have you considered that whatever the problem, after all of the people and organizations you have consulted, the company may have been right? Maybe there was no coverage? Maybe your contract with the company didn’t cover what you wanted covered? Just a thought from someone without any knowledge of the actual problem. Insurance is a contract and needs to be treated as one.
a few bad instances
God please Safeguard us from those without a clue.
At what point do you look at any situation and say, maybe I’m wrong and they’re right. I say this not having any knowledge of your situation. But if you have gone to the extent you say, maybe you need to move on. Again, whatever your loss may be, I’m sorry, but you need to look at the entire situation and decide for yourself. Ranting at us insurance people over and over isn’t solving a thing. We aren’t an evil industry full of evil people. We are like any other business, full of mostly good people and a few bad ones. We hope that the bad ones can be weeded out and punished. Move on to other options. You just are not doing any good at this point.
Just a thought from someone without any knowledge of the actual problem. Insurance Regulated BUSINESS We hope that the bad ones can be weeded out and punished. Move on to other options. You just are not doing any good at this point.
Say who you! Have you no clue! State Farm has wasted so much of the Policy holders money. For the games they have you all play. If you are not one of this people marvelous than God bless you If you are you need to get a clue. This is not a game to me. Go the extra mile for my regulated way.
Read my post again. I said that I don’t know the situation. Also, if you assume that this situation is indicative of insurance people and companies in general you are a moron. Is that simple enough for you to understand?
In 2002 a federal trial judge allowed the suit to proceed. The court rejected Allstate’s argument and determined that the states at issue (Texas and Florida) had not yet enacted regulations governing credit scoring so plaintiffs could look to federal law and courts. In addition, this court noted that federal courts have held that the McCarran-Ferguson Act does not preclude racial discrimination suits, even where states have enacted insurance and anti-discrimination statutes.
In September, 2003, the U.S. Court of Appeals for the Fifth Circuit in New Orleans affirmed the decision to deny Allstate’s motion to dismiss.
With this latest Supreme Court affirmation, the case now proceeds to trial on its merits.
If your customer pays their Sears card late then they will file lots more claims than if they pay their Sears card on time. It must be true because that is what they say. So there we have it.
As long as it only raises the rates for those people who cares? Now if it raises the rates for our people we need the goverment to institute controls!
We cannot send a message to people who choose not to pay the bills as if it okay what they had done (along with related behavior paterns). I think the best agencies weed out who they will and won’t insure. Of course, there will always be an agency who specializes in this type of business, often a newcomer who will write anything. I guess there is nothing wrong with getting practice and perhaps this type of client is good practice. But they also need to realize that people are not going to take them seriously if they are not the type of people who meet their obligations. In other words, they can’t be trusted (and the history says that). A combination of perhaps paying more money for their insurance as well as learning they are not the most desirable client sends a strong message that they need to cut their act. They need to change their behaviors as to make themselves more desirable clients. Remember, we pretend like credit is not their fault and that they did not have control over it. Don’t be fooled, these people are who they are. If we treat them like their credit is a non-issue would tell them that they can keep practicing their ways.
I know many people are going to point out the credit score is a form of racism. I will explain why do they even say such thing and how they link credit to race.
Here is why….
Some people associate Hispanic, African-Americans, other minorities to people who are not intelligent, not responsible and not capable of getting high credit scores. I refuse to insult any minority of such silliness, and perhaps even racist.
Why do they pretend that Hispanics are a nobody? Why do they think Hispanics are low income earners? Why do they think Hispanics are not Doctors, Lawyers, Engineers, CPAs and many other high paying professions? Is this insulting or what? Of course it is!
It is time we end labeling certain minorities and judge them for the content of the character and certainly not the color of their skin.
That is the promise of catastrophe models like RMS’. And it’s the promise of new “data-mining” methods that let companies use a person’s income, education or ZIP code to predict future claims. That in turn encourages insurers to raise rates or refuse coverage for the very people who need it most — low- and moderate-income families, for example, or those who’ve suffered such setbacks as unemployment
This is probably useless, but I will give this a try. Insurance is once again a BUSINESS, not a charity. The company statistically determines who will have the most losses and either charges them the rate appropriate to the exposure or doesn’t write them. If these individuals have a statistically proven higher chance of loss they must pay more money or they can’t have the coverage. Yes, there is a profit. A company has to turn a profit. If you think goverment can provide the coverge better wait until the big one hits Florida and see what happens. Study the purpose of insurance and how it has to work. It’s just another business and one that provides a good service dispite your stated opinions.
If it we up to me and my Berkeley clan, I would make it illegal for anyone to make a profit. Of course my brain is so fried on drugs, so I don’t understand the implications of someone not making a profit. I just want my free paycheck.
Missouri Jury Tells State Farm to Pay Up
By Dave Thomas
September 5, 2005
A Kansas City jury recently had some bad news for one of the nation’s top insurers in deliberations that reportedly took less than six hours. The message to State Farm–pay up.
Five former State Farm Ins-urance agents were awarded $20 million by the jury that decided the agents were improperly terminated for being critical of the way the insurer reportedly treated its policyholders.
Tana Glockner, Joseph J. Kelly, Clifford F. Lykke, Michael Lee Morgan and Lee P. Saghirian, whose contracts were terminated in January 2000, were awarded $9 million in actual damages and $11 million in punitive damages. The five, who reportedly had more than 100 years of collective experience with State Farm, had spoken out in the fall of 1999 against the company, saying there was a need for change in State Farm’s management structure.
In late 1999, the five agents gave permission to use their names in a letter to the Texas insurance commissioner that was critical of State Farm’s treatment of policyholders.
Among the allegations were that the insurer charged extra for homeowners insurance, tried to defraud accident victims from full compensation and permitted sales discrimination to occur at the company. Glockner and Morgan had already given permission for their names to be signed to a letter to the Senate Commerce Committee and had participated in a Washington news conference.
A lawyer for the plaintiffs noted that at the heart of the Missouri case, was determining whether the insurer could fire an agent for going public to protect policyholder interests. He added that during the mid-1990s, there were a number of verdicts and settlements in which the insurer was discovered to have treated policyholders unfairly in a variety of different ways.
State Farm Director of External Relations, Phil Supple, told Insurance Journal that the company was obviously disappointed with the jury’s decision. “We believe our actions were appropriate, and we do not believe the verdict is supported by the evidence presented at trial,” Supple said. “We will reflect on the verdict and explore our options.”
A company has to turn a profit- A company like State Farm makes so munch. Think of the money this compay waste. Put all of this together they say we all committ fraud. Come on we need charity we all pay for this crap. Read all the documents of abuses by the Ins compay it makes you Nobody Important to them so do not need the help you paid for.
I am so sick of the idiots who comment on this site with no concept of the good done by insurance companies. They take a few bad instances out of millions of claims and turn our good work into some kind of criminal enterprise. You comment on things you are too stupid to understand. I’m sorry for the bitterness in this post, but I’m just fed up with people posting on this site. As has been said so many times before, if you can do it better, start your own company. Better yet, try to do without insurance. This was a professional insurance site some time ago before the nutters found it. Go away.
The bill of rights was summarily executed during the state Legislative session, but Buckel’s not giving up. He said he has 10,000 e-mail supporters. Learn more about the bill of rights at msbillofrights.com. You can also go there to send him your insurance horror stories. Yes, he’s collecting them to help in his effort with the bill.
“The insurance companies hire attorneys to put language in their policies so they don’t have to pay our claims,” Buckel said. “We need Legislators to give us a bill of rights to protect us.”