Really??
Why would you want to hang on to those? MVRs have a higher error rate than quoted here for credit reports. If you want to dump the use of insurance scores that are actuarially proven to be more predictive of accidents than age or driving record, why not just force companies to divide the number of drivers into the dollars they expect to be paid out on losses for the next year, adjust for expenses and everyone pays the same??
Maybe you are happy to subsidize all those risks that insurance scores predict will be filing a claim, but I’m not!
Odds are probably pretty good that you’re a receipient of lower insurance rates due to credit scoring. Next time you re-quote / renew your coverage, feel free to opt out of the credit scoring and see where your insurance premium stands.
MVR’s are generally very good at identifying violations, accidents, drivers license suspensions, expired licenses, DUI convictions etc. I think CLUE reports are very valuable in identifying claims, both comp, collision and liability. I would rather see that info than some credit report that may or may not be accurate. In this current economy with 23 million unemployed or underemployed, scores are bound to fall and the result is higher prices for renewals at a time the customer cannot afford a higher premium. Companies tend to put people into a higher tier for rating when they see the score drop some. Is that fair to the consumer who still has a spotless record for driving? I think not!
Are you kidding? You can take defensive driving to dismiss a ticket a year in Texas, and you can enter deferred to dismiss another ticket a year in Texas. That’s two minor violations a year that, in theory, would never ever be seen by an underwriter. Tell me how an MVR is useful? I don’t even know why insurers run MVRs anymore for anything other than checking for major violations.
So the violation doesn’t even appear as dismissed or deferred on the MVR? Wow. That is a pretty good racket. Does the county/city/state get to charge the driver a nice fat fee for that option?
February 12, 2013 at 2:28 pm
Agent says:
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Since insurance companies rely heavily on credit scoring to determine premium charged, it behooves the consumer to check their score periodically to see if there are errors. I am certainly not a fan of scoring. I have many customers who are responsible, have little or no debt and don’t use credit for purchases and they don’t have as good a score as some who have several credit cards with substantial balances. Responsibility is sometimes punished with higher premiums.
What has always bothered me about credit scoring is that it is the consumer’s responsibility to make sure the credit companies have it right for the benefit of the companies that use scores against them. 5% of the population will be denied a job, will pay higher insurance rates, and not be able to get a loan to buy a house (this is a good thing because they will have no job to pay for it anyway) and live the American nightmare. This must be how the top 1%ers get back at the bottom 5%ers. The way to stop mistakes is to make the credit companies responsible to find the mistakes. Fine them $100,000 for every mistake, plus $40,000 for attorney’s fees, take out state and federal get taxes and the victim gets the rest. Oh and every company that uses an invalid score kicks in $10,000 per occurrence for the victim and $4,100 for the attorneys as well. I added in the attorney’s fees as this will get them to jump all over these injustices.
Bob, there are so many things that go on behind the scenes on scoring. Companies have almost too much access to private information. If they have your social and license info, they can pull out just about everything going on in your life.
I am not a fan of credit scoring for insurance. Premiums should be determined by driving record, type of car driven and age. The fact a person has medical bills that have “sunk” their credit, or lost a job and had to make lower than regular payments, does not change how they drive their car. There are a lot of hard working people out there (myself included) that with the blink of an eye, and circumstances beyond their control can have their credit change overnight. These are the people that can least afford to be hit with higher bills. I am not talking about people that run up huge credit card debt taking vacations, eating out, and buying shoes and stuff they don’t need, and now whine cuz they have the debt.
Statistically, your scenario has no merit.
There is NO WAY someone with a job, and good credit, should get the same premium as someone without a job, and poor credit….that is a FIRE risk…easy cash, the stats say so.
Obamacare is not going to rate by MVR Data. In fact, all PreX people will be automatically accepted even if they are in stage 4 Cancer. All you have to do is go on the exchange and fill out their 15 page application and you are good to go.
February 13, 2013 at 1:04 am
Mark says:
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Which is why medical catastrophes can be appealed and not counted in your insurance score, but you actually have to do the leg work to prove yourself.
I was speaking for myself when talking about the credit score, and I was primarily referring to auto ins.
Scenario…husband hit with horrible cancer, fortunately great insurance for Medical but no disability. It takes 6 months for SSI to help out (he dies a week before the first and only tiny check arrives). In the mean time, no income from him, and my income drops in half as I am doing my best to work part time and take care of him (and I am the primary bread winner). 6 months later he is gone, and I have medical out of pocket bills to pay, and try to catch up on everything else that fell aside trying to care for a loved one, and still care for children in the home. The medical bills were the small part. I never had an accident, or turned in a claim, or got a ticket but my insurance go us. How is that right? I have had a license for drivingsince I was 14 , but my rates are higher. As for the house insurance, had insurance with the same company for 20 years but my insurance is higher….never had a claim. Anyone’s Circumstances can change in the blink of an eye and it has taken years to dig out, and I am still digging. Just saying….
Note to Insurance DataArchitect – Without a job LEADS to poor credit! So, the system should make life even more difficult for a family with the husband laid-off and seriously searching for a replacement?
I do hope the victim has the common sense to get his family out before he starts the fire.
People like you are just looking for a number, to avoid real underwriting!
Credit scoring is simply a way to avoid paying for real underwriting! I have no issue with CLUE – past performance can be related to future activity.
If I drop a credit card, my credit score temporarily drops also. Does this mean I’m going to burn my car?
C’mon Insurance DataArchitect! Get real.
The truth is that insurance scoring is predictive. Every study, including the study commissioned by Bob Hunter (he of the CFA) when he was Commissioner of Insurance in Texas, has confirmed this. Drivers with higher insurance scores file less claims than drivers with lower scores. To charge premiums that don’t take this into account is asking some groups to subsidize the premiums of other groups.
Many of you have talked about people who lose their job or who have medical issues not being able to afford premium increases that may occur because of changes in their score. As most of you have pointed out with other stories, insurance is not intended to be a social program. Remember your comments regarding politicians’ statements in the aftermath of superstorm Sandy.
If you really believe what you say about the factors which should be used in rating auto insurance, start a company and see how well it works for you. Not using actuarially proven rating methods will guarantee your demise. Look at what happened to State Farm, American Family, etc. when they held off using insurance scores. Their written premium levels plummetted along with their profitability.
JS, Bob Hunter was easily the worst Commissioner of Insurance the State of Texas has ever had. He lasted only a few years since he was nothing more than a Consumer Advocate like he has been his whole life. Companies trying to do business in the state were wholeheartedly opposed to what he was doing because of his edicts and rulings. Agents didn’t like him as well because he made their lives more difficult.
I agree with your comments on Mr. Hunter. The reason I brought him up is his CFA background and his desire to prove that insurance scoring doesn’t work. It shows how strong the evidence is; even Bob Hunter had to agree it’s predictive.
I understand that there is some relationship between credit scores and claims. What I don’t understand is “why?” other than fraudulent claims. Is the increase in claims all fraud?
JS, I don’t think State Farm has plummeted very far. I think they are still the largest domestic carrier in the country. Their annual revenues exceed many countries in the world. They have had some problems being big and thought they didn’t need re-insurance to write business in Louisiana and along came Katrina and that did a job on their experience.
If people object to use of credit scores in insurance rating because they are inaccurate, the solution is simple: be diligent in correcting the credit reporting errors.
The actuarial studies that concluded credit ratings are highly predictive of future driving records should not be dismissed because of data errors.
Actuaries and underwriters should strive to devise a more advanced system that combines credit scores, driving records, and other predictors into a more accurate and equitable rating system that encourages good driving behavior.
The typical advice to contact creditor bureaus does not work for millions and that is the problem. The credit bureaus simply report what the creditors tell them to report. When a consumer complains, the bureaus simply confirm the same incorrect information with the creditors. And millions of consumers get stuck at this point, having no leverage to get the creditors to fix errors. 60 Minutes showed how their reporter, Steve Croft, got nowhere using the typical, ineffective advice to write the credit bureaus. Here is a solution that works and how I got AMEX and Citicorp to change their errors after they refused. The leverage is with the creditors and using small claims court gets their attention every time and is very inexpensive:
Just more proof insurance should NOT be rated by credit score – it should be age & driving record period!
Really??
Why would you want to hang on to those? MVRs have a higher error rate than quoted here for credit reports. If you want to dump the use of insurance scores that are actuarially proven to be more predictive of accidents than age or driving record, why not just force companies to divide the number of drivers into the dollars they expect to be paid out on losses for the next year, adjust for expenses and everyone pays the same??
Maybe you are happy to subsidize all those risks that insurance scores predict will be filing a claim, but I’m not!
Odds are probably pretty good that you’re a receipient of lower insurance rates due to credit scoring. Next time you re-quote / renew your coverage, feel free to opt out of the credit scoring and see where your insurance premium stands.
Exactly how good are driving record reports??
MVR’s are generally very good at identifying violations, accidents, drivers license suspensions, expired licenses, DUI convictions etc. I think CLUE reports are very valuable in identifying claims, both comp, collision and liability. I would rather see that info than some credit report that may or may not be accurate. In this current economy with 23 million unemployed or underemployed, scores are bound to fall and the result is higher prices for renewals at a time the customer cannot afford a higher premium. Companies tend to put people into a higher tier for rating when they see the score drop some. Is that fair to the consumer who still has a spotless record for driving? I think not!
Are you kidding? You can take defensive driving to dismiss a ticket a year in Texas, and you can enter deferred to dismiss another ticket a year in Texas. That’s two minor violations a year that, in theory, would never ever be seen by an underwriter. Tell me how an MVR is useful? I don’t even know why insurers run MVRs anymore for anything other than checking for major violations.
So the violation doesn’t even appear as dismissed or deferred on the MVR? Wow. That is a pretty good racket. Does the county/city/state get to charge the driver a nice fat fee for that option?
Since insurance companies rely heavily on credit scoring to determine premium charged, it behooves the consumer to check their score periodically to see if there are errors. I am certainly not a fan of scoring. I have many customers who are responsible, have little or no debt and don’t use credit for purchases and they don’t have as good a score as some who have several credit cards with substantial balances. Responsibility is sometimes punished with higher premiums.
What has always bothered me about credit scoring is that it is the consumer’s responsibility to make sure the credit companies have it right for the benefit of the companies that use scores against them. 5% of the population will be denied a job, will pay higher insurance rates, and not be able to get a loan to buy a house (this is a good thing because they will have no job to pay for it anyway) and live the American nightmare. This must be how the top 1%ers get back at the bottom 5%ers. The way to stop mistakes is to make the credit companies responsible to find the mistakes. Fine them $100,000 for every mistake, plus $40,000 for attorney’s fees, take out state and federal get taxes and the victim gets the rest. Oh and every company that uses an invalid score kicks in $10,000 per occurrence for the victim and $4,100 for the attorneys as well. I added in the attorney’s fees as this will get them to jump all over these injustices.
Bob, there are so many things that go on behind the scenes on scoring. Companies have almost too much access to private information. If they have your social and license info, they can pull out just about everything going on in your life.
I am not a fan of credit scoring for insurance. Premiums should be determined by driving record, type of car driven and age. The fact a person has medical bills that have “sunk” their credit, or lost a job and had to make lower than regular payments, does not change how they drive their car. There are a lot of hard working people out there (myself included) that with the blink of an eye, and circumstances beyond their control can have their credit change overnight. These are the people that can least afford to be hit with higher bills. I am not talking about people that run up huge credit card debt taking vacations, eating out, and buying shoes and stuff they don’t need, and now whine cuz they have the debt.
Statistically, your scenario has no merit.
There is NO WAY someone with a job, and good credit, should get the same premium as someone without a job, and poor credit….that is a FIRE risk…easy cash, the stats say so.
Not a Score fan was referring only to the auto insurance, so the fire risk presented by poor credit doesn’t really apply.
Not a Score was making a blanket statement that has no merit, even limiting it to PC Auto, it has no merit as studies have shown.
He has said that premiums should be determined by your MVR…really homeowners by MVR?? Health by MVR..well maybe, BOP, Prof Liability??? Life???
Obamacare is not going to rate by MVR Data. In fact, all PreX people will be automatically accepted even if they are in stage 4 Cancer. All you have to do is go on the exchange and fill out their 15 page application and you are good to go.
Which is why medical catastrophes can be appealed and not counted in your insurance score, but you actually have to do the leg work to prove yourself.
I was speaking for myself when talking about the credit score, and I was primarily referring to auto ins.
Scenario…husband hit with horrible cancer, fortunately great insurance for Medical but no disability. It takes 6 months for SSI to help out (he dies a week before the first and only tiny check arrives). In the mean time, no income from him, and my income drops in half as I am doing my best to work part time and take care of him (and I am the primary bread winner). 6 months later he is gone, and I have medical out of pocket bills to pay, and try to catch up on everything else that fell aside trying to care for a loved one, and still care for children in the home. The medical bills were the small part. I never had an accident, or turned in a claim, or got a ticket but my insurance go us. How is that right? I have had a license for drivingsince I was 14 , but my rates are higher. As for the house insurance, had insurance with the same company for 20 years but my insurance is higher….never had a claim. Anyone’s Circumstances can change in the blink of an eye and it has taken years to dig out, and I am still digging. Just saying….
Note to Insurance DataArchitect – Without a job LEADS to poor credit! So, the system should make life even more difficult for a family with the husband laid-off and seriously searching for a replacement?
I do hope the victim has the common sense to get his family out before he starts the fire.
People like you are just looking for a number, to avoid real underwriting!
Credit scoring is simply a way to avoid paying for real underwriting! I have no issue with CLUE – past performance can be related to future activity.
If I drop a credit card, my credit score temporarily drops also. Does this mean I’m going to burn my car?
C’mon Insurance DataArchitect! Get real.
The truth is that insurance scoring is predictive. Every study, including the study commissioned by Bob Hunter (he of the CFA) when he was Commissioner of Insurance in Texas, has confirmed this. Drivers with higher insurance scores file less claims than drivers with lower scores. To charge premiums that don’t take this into account is asking some groups to subsidize the premiums of other groups.
Many of you have talked about people who lose their job or who have medical issues not being able to afford premium increases that may occur because of changes in their score. As most of you have pointed out with other stories, insurance is not intended to be a social program. Remember your comments regarding politicians’ statements in the aftermath of superstorm Sandy.
If you really believe what you say about the factors which should be used in rating auto insurance, start a company and see how well it works for you. Not using actuarially proven rating methods will guarantee your demise. Look at what happened to State Farm, American Family, etc. when they held off using insurance scores. Their written premium levels plummetted along with their profitability.
JS, Bob Hunter was easily the worst Commissioner of Insurance the State of Texas has ever had. He lasted only a few years since he was nothing more than a Consumer Advocate like he has been his whole life. Companies trying to do business in the state were wholeheartedly opposed to what he was doing because of his edicts and rulings. Agents didn’t like him as well because he made their lives more difficult.
I agree with your comments on Mr. Hunter. The reason I brought him up is his CFA background and his desire to prove that insurance scoring doesn’t work. It shows how strong the evidence is; even Bob Hunter had to agree it’s predictive.
I understand that there is some relationship between credit scores and claims. What I don’t understand is “why?” other than fraudulent claims. Is the increase in claims all fraud?
JS, I don’t think State Farm has plummeted very far. I think they are still the largest domestic carrier in the country. Their annual revenues exceed many countries in the world. They have had some problems being big and thought they didn’t need re-insurance to write business in Louisiana and along came Katrina and that did a job on their experience.
If people object to use of credit scores in insurance rating because they are inaccurate, the solution is simple: be diligent in correcting the credit reporting errors.
The actuarial studies that concluded credit ratings are highly predictive of future driving records should not be dismissed because of data errors.
Actuaries and underwriters should strive to devise a more advanced system that combines credit scores, driving records, and other predictors into a more accurate and equitable rating system that encourages good driving behavior.
The typical advice to contact creditor bureaus does not work for millions and that is the problem. The credit bureaus simply report what the creditors tell them to report. When a consumer complains, the bureaus simply confirm the same incorrect information with the creditors. And millions of consumers get stuck at this point, having no leverage to get the creditors to fix errors. 60 Minutes showed how their reporter, Steve Croft, got nowhere using the typical, ineffective advice to write the credit bureaus. Here is a solution that works and how I got AMEX and Citicorp to change their errors after they refused. The leverage is with the creditors and using small claims court gets their attention every time and is very inexpensive: