Wow after 30 years as a broker this is the best snowjob that any industry has sold to the consumers, KUDOS! We are making the oil and tobacco industry yearn for another burn. Let me give THREE REASONS that this was a great snowjob 1) The insurance industry heavily funded against it. They are high-fiving and laughing at there power. Why would they want lower premiums, because if you believe this, then you must believe the oil companies are going to return their profits for high prices at the pump. 2) It has always been a fact that our best policyholders had the ability to pay, but if the insurance companies said this it would be unfair, so they have you believe that credit scoring is not the same. The ability to pay is what determines you credit score! 3) Finally, this is how the tobacco industry made billions, they did not tell the consumer what was in their cigarettes, and when asked said I don\’t know. Please someone tell me how the credit score formula is derived, it you ask any lending institution they will say \”I really don\’t know\” yet they base your rate or even acceptance on this. Believe me they will not tell you whats in the formula because it only favors who CORPORATE AMERICA. Please if you really believe this was good for the consumers, then your corporate bosses have done a great job of selling. Simply put, this was a business decision made by the insurance industry to boost profits by giving better rates to those with the ability to pay. Do you really believe that poor people can not manage there finances, they simple do not make enough money to manage. So from an underwriting viewpoint not making enough money creates ONE KIND of stress that causes accident, so does divorce,death, and illness. So now lets increase rates if you have step children. I think I\’ve made my point, there are many factors which can effect the probablity of a loss, but credit scoring is category of consumers rated by their pocketbook, not their driving record.
Definition of: by Merriam-Webster
Main Entry: 2red·line
Pronunciation: \’red-\”līn, -\’līn
intransitive senses
: to withhold home-loan funds or insurance from neighborhoods considered poor economic risks
transitive senses : to discriminate against in housing or insurance.
Being poor or working class is not a crime! Nor does it mean one is a worst insurance risk than others. This defeat is nothing more than an endorsement of legalized redlining. It also shows those with better \”means\” have a higher likelihood of voting than those who are struggling and most likely to worry about getting to work on election day. What happens if you have no health insurance and you have a heart attack? The hospital puts you into collection and you are therefore a \”bad driver?\” Give me a break!
Congrats Oregonians for realizing that your majority can and will rule when it comes to smart business decisions. I can imagine the uproar this would have caused country wide if Measure 42 would have passed. I\’ll bet the 34.42% who voted for this measure all have adverse financial responsibility habits. Again congrats to you for setting the bar level for the rest of the country.
It is not a great stretch of the imagination to accept the possibility that there are people with poor credit scores who are no more of a risk to an insurer as someone with a perfect credit score.
Where has it been proven that low income or one\’s income to debt ratio has any bearing on their driving habits or exposure to risk? What resources might I tap to obtain this information?
Granted, some low-income people can\’t afford insurance and therefore go without it, often illegally. But there are well-to-do people who break the law, too… and drink and drive and have dangerous habits. There are certain people in all levels of income who are high risks and I\’m betting the risk has little (if anything) to do with their credit score.
Yesterday I saw who was voting, upper middle class who know what their credit score is, the 18-20 year old age group was missing… they are the market that should be educated as to what they\’re credit scores truly mean…
I suspect that KLS needs a bit more info concerning credit scoring. Most models do not in clude income in its formula. How timely your bills are paid is weighted more heavily. Rich or poor, it doesn\’t matter, only if you pay your bills.
Yes, I *DO* need more information. I plainly asked for it.
Timely payment of bills is part of the equation, that much I know. However, I\’m fairly certain income and income-to-debt ratio is factored into a credit score.
Again, I don\’t see how the inability to balance a budget is parallel with an insurance risk. Credit scoring has it\’s benefits, but I\’m not sure how those benefits apply to common types of insurance.
Do credit scores specify whether slow/late payment is due to unforeseen circumstances or irresponsibility? It\’s unethical to assume that ALL bad credit scores are due to ignorance or carelessness with money.
If someone is a horrible money manager, does that automatically mean they\’re a bad driver? Prone to illness? Likely to make/cause unnecessary claims?
If someone has an excellent credit score, what can one assume about that person? Can we assume they\’re \’Safety Jones\’ behind the wheel? Can we assume with certainty that they keep the trees around their house trimmed and their sidewalks free of ice in the winter?
KLS your starting to catch on. People with poor or adverse credit scores (not credit reports) tend to have more claims as a whole. Not all people in a certain group have the same habits of that group but this is still \”the group\”.
People with good or better credit scores tend to make premium payments on time, have less tendency to file claims, and tend to stay with the same insurer longer thus reducing overall expenses to the carriers.
The industry has done many studies on this issue therefore the actuarials tend to favor the better credit scoring individuals.
I\’m all for it. You can give me 5 good credit scoring clients and you can have the 10 others.
I\’ve seen studies on the increase in rating accuracy by incorporating credit scoring to personal auto rating and the results are remarkably strong. Risks with the best credit score are often twice as profitable as those with the lowest score.
Nobody is saying that credit scores are perfect predictors of loss. They aren\’t, but no other rating variable is. Just like there are drivers out there with speeding tickets who won\’t cause wrecks there are drivers with poor credit scores that won\’t cause wrecks either, but the Insurance company is just playing the odds.
If incorporating these models didn\’t improve price segmentation, then insurers wouldn\’t use them. Heck, if you really think that credit score isn\’t predictive of loss activity then start your own company, don\’t surcharge for poor credit score, and write all the poor credit risks. I\’m sure you\’ll make a fortune….
Do you believe that people with high credit scores should pay less for there insurance? If so, please answer this. If 2 out of 10 people with low credit scores have accidents, and people with a high credit score have only 1 out of 10 accidents, under what logic can you explain to those 8 people without an accident that they deserve to pay more for there insurance. Please explain…..
Insurance companies would have us believe that ins scoring is not disproportionately unfair to poor people. But, have they ever told us what the average ins score of someone making 15 to 20k is? After rent and a myriad of other expenses, depending on whether or not you have children, most people will struggle to pay their bills on this income and eventually their credit score is going to suffer.
So, we have to ask ourselves do we think the poor should pay more than the rich for car insurance?
While we are at it, what are numbers based on race. Do Hispanics have more accidents? How about blacks? We have determined it to be illegal to charge a higher rate based on race, even if there is an actuarial connection. In the end maybe credit scoring isn\’t as \”fair\” as we think it is.
Also, rates should not go up with out credit scoring, the people who have good credit scores would just pay more, and the other people would pay less. Its a matter of distribution. Why would a lack of credit scoring make rates go up across the board?????
Oh yea, if you are already paying a higher amount based on the fact that your score is low and they think you MIGHT have an accident and cost the ins co more money, then isnt it like charging double when you surcharge that person for an accident that they actually do have??
Skip ins scores and increase the surcharge on accident AND even COMP claims. ADD a surcharge for the number of late payments. All of these things would be more fair.
To simple say that people with high credit scores will have fewer losses is true. The point is it is as dicriminationg as saying people under 5 feet tall have more accident becuase they are short. I have heard the typical insurance industry response if you don\’t like it go somewhere else, or start you own insurance company with only poor insurance risks. Sorry, but this arrogance by the industry does not make it right, just another business decision rationalized by power………
As an employee of the insurance industry, I would stipulate that the insurance industry as a whole does not accept credit scoring as a perfect way to underwrite risk. If it can be treated as a corollary way to analyze risk – great, but life does happen as someone indicated in another comment.
The saddest thing by far is that once your credit does take a dip – it takes YEARS to show improvement. For individuals who may already be at risk for higher rates – ie someone who suffers an unexpected unemployment or may have a catastrophic illness in the family not fully covered by health insurance – they may suffer late payments or a higher debt to income ratio, this kind of ratemaking can spell doom for that particular insured. We all know that kind of changes taking place in healthcare insurance, it could happen to most people!
Another thing to consider is that insurers are using all different sorts of credit models – what one company considers \”gold\” may merely by an average risk for another carrier. Do consumers know that with some companies – merely shopping for a good rate on a loan for your home or car can affect your credit rating?
Standardization is a bare minimum that is needed to make credit rating fair.
I can tell that several of you don\’t understand insurance credit scoring very well.
You all are aware that your insurance credit score is not the same as your regular lending credit score aren\’t you?
For example, many insurance companies exclude items such as Medical Related charges specifically for the reasons mentioned earlier in these messages and b/c they have poor predictive power. If you want to see a good example google Allstate\’s most recent credit scoring model they were forced to disclose.
Also, I think some people on here have misguided concepts of what is fair. I have built and maintained a good credit score. I don\’t think it is fair to prevent me from using that to my advantage to obtain a better insurance rate. It isn\’t my job to subsidize worse insurance risks than myself. In fact, that sounds the oppossite of fair.
If you want insurance welfare, at least do it explicity through direct government subsidization of insurance premiums for high risk insurance customers rather than the hidden taxation currently in place by way of manipulating, restricting, and regulating insurer rating plans. At least through explicit subsidization, voters can see the actual costs and vote accordingly in a demogractic fashion to either expand or contract the subsidies.
Anonymous, you have built up your credit score based on the fact that you make more money than you spend. If you were a poor person this might not be posible. So yes, you may be smarter and at an advantage due to your job and economic status, the question is do you want to use your advantage to hold poor people down, or help disadvantaged people? When your rates go down due to your credit score, they go down at the cost of higher rates for poor people and often minorities. It actually tells a lot about you as a human being.
Poor people are a burden on social services, so do we raise taxes on the poor people? It just doesnt add up, unless you are trying to create a society where the rich get richer and the poor get poorer.
Sorry guys, but show me a divorced/single mother who tries to pay her bills w/late support payments and/or a person who tries to trade in a vehicle w/a dealership who is trying to obtain financing for well over the value of a vehicle and you have a \”victim\” of poor credit ratings, even though the issue is out of her or his control… the math just doesn\’t add up and when it comes to the affluent filing less claims, may be true but when they file a claim it\’s usually for a larger amount due to the fancy car or the fancy toy that got damaged, you won\’t find a \”poor\” person driving a $40,000 vehicle or carrying high end limits, all of which can be paid out in a one-time incident causing a much larger loss to the insurance company than three or four \”poor\” credit risks claims. Still just doesn\’t add up to me
What I cannot believe is a company that insures a homeowner for 5 years then non-renews for year 6 stating that their credit score was too low to renew! 5 years without a claim and they are now a bad risk? Something is not quite right but I ended up with a new client who qualifed for a \”loss-free\” discount.. go figure!
Which 8? How about we just get rid of insurance altogether and just let people pay for their own repairs and medical bills??? Insurance is not individually priced. Similar groups are pooled together to spread the risk and cost to the benfit of the group. As a pool, the group of 10 with low credit scores are twice as likely to have an accident and should pay twice the price that the higher credit group pays.
This is perhaps the most sublime piece of corporate propaganda I’ve ever seen and the Oregonians Against Insurance Rate Increases sounds like ancorporate astro-turfing sham. Hey, they got the job done. They were able to convince just enough voters that black is white and white is black to make it happen. I’m a little late to the story, but Rock On corporate America!!
Wow after 30 years as a broker this is the best snowjob that any industry has sold to the consumers, KUDOS! We are making the oil and tobacco industry yearn for another burn. Let me give THREE REASONS that this was a great snowjob 1) The insurance industry heavily funded against it. They are high-fiving and laughing at there power. Why would they want lower premiums, because if you believe this, then you must believe the oil companies are going to return their profits for high prices at the pump. 2) It has always been a fact that our best policyholders had the ability to pay, but if the insurance companies said this it would be unfair, so they have you believe that credit scoring is not the same. The ability to pay is what determines you credit score! 3) Finally, this is how the tobacco industry made billions, they did not tell the consumer what was in their cigarettes, and when asked said I don\’t know. Please someone tell me how the credit score formula is derived, it you ask any lending institution they will say \”I really don\’t know\” yet they base your rate or even acceptance on this. Believe me they will not tell you whats in the formula because it only favors who CORPORATE AMERICA. Please if you really believe this was good for the consumers, then your corporate bosses have done a great job of selling. Simply put, this was a business decision made by the insurance industry to boost profits by giving better rates to those with the ability to pay. Do you really believe that poor people can not manage there finances, they simple do not make enough money to manage. So from an underwriting viewpoint not making enough money creates ONE KIND of stress that causes accident, so does divorce,death, and illness. So now lets increase rates if you have step children. I think I\’ve made my point, there are many factors which can effect the probablity of a loss, but credit scoring is category of consumers rated by their pocketbook, not their driving record.
Definition of: by Merriam-Webster
Main Entry: 2red·line
Pronunciation: \’red-\”līn, -\’līn
intransitive senses
: to withhold home-loan funds or insurance from neighborhoods considered poor economic risks
transitive senses : to discriminate against in housing or insurance.
Being poor or working class is not a crime! Nor does it mean one is a worst insurance risk than others. This defeat is nothing more than an endorsement of legalized redlining. It also shows those with better \”means\” have a higher likelihood of voting than those who are struggling and most likely to worry about getting to work on election day. What happens if you have no health insurance and you have a heart attack? The hospital puts you into collection and you are therefore a \”bad driver?\” Give me a break!
Congrats Oregonians for realizing that your majority can and will rule when it comes to smart business decisions. I can imagine the uproar this would have caused country wide if Measure 42 would have passed. I\’ll bet the 34.42% who voted for this measure all have adverse financial responsibility habits. Again congrats to you for setting the bar level for the rest of the country.
In my opinion, it sounds like rubbish.
It is not a great stretch of the imagination to accept the possibility that there are people with poor credit scores who are no more of a risk to an insurer as someone with a perfect credit score.
Where has it been proven that low income or one\’s income to debt ratio has any bearing on their driving habits or exposure to risk? What resources might I tap to obtain this information?
Granted, some low-income people can\’t afford insurance and therefore go without it, often illegally. But there are well-to-do people who break the law, too… and drink and drive and have dangerous habits. There are certain people in all levels of income who are high risks and I\’m betting the risk has little (if anything) to do with their credit score.
Yesterday I saw who was voting, upper middle class who know what their credit score is, the 18-20 year old age group was missing… they are the market that should be educated as to what they\’re credit scores truly mean…
I suspect that KLS needs a bit more info concerning credit scoring. Most models do not in clude income in its formula. How timely your bills are paid is weighted more heavily. Rich or poor, it doesn\’t matter, only if you pay your bills.
You suspect correctly, RJW.
Yes, I *DO* need more information. I plainly asked for it.
Timely payment of bills is part of the equation, that much I know. However, I\’m fairly certain income and income-to-debt ratio is factored into a credit score.
Again, I don\’t see how the inability to balance a budget is parallel with an insurance risk. Credit scoring has it\’s benefits, but I\’m not sure how those benefits apply to common types of insurance.
Do credit scores specify whether slow/late payment is due to unforeseen circumstances or irresponsibility? It\’s unethical to assume that ALL bad credit scores are due to ignorance or carelessness with money.
If someone is a horrible money manager, does that automatically mean they\’re a bad driver? Prone to illness? Likely to make/cause unnecessary claims?
If someone has an excellent credit score, what can one assume about that person? Can we assume they\’re \’Safety Jones\’ behind the wheel? Can we assume with certainty that they keep the trees around their house trimmed and their sidewalks free of ice in the winter?
KLS your starting to catch on. People with poor or adverse credit scores (not credit reports) tend to have more claims as a whole. Not all people in a certain group have the same habits of that group but this is still \”the group\”.
People with good or better credit scores tend to make premium payments on time, have less tendency to file claims, and tend to stay with the same insurer longer thus reducing overall expenses to the carriers.
The industry has done many studies on this issue therefore the actuarials tend to favor the better credit scoring individuals.
I\’m all for it. You can give me 5 good credit scoring clients and you can have the 10 others.
I\’ve seen studies on the increase in rating accuracy by incorporating credit scoring to personal auto rating and the results are remarkably strong. Risks with the best credit score are often twice as profitable as those with the lowest score.
Nobody is saying that credit scores are perfect predictors of loss. They aren\’t, but no other rating variable is. Just like there are drivers out there with speeding tickets who won\’t cause wrecks there are drivers with poor credit scores that won\’t cause wrecks either, but the Insurance company is just playing the odds.
If incorporating these models didn\’t improve price segmentation, then insurers wouldn\’t use them. Heck, if you really think that credit score isn\’t predictive of loss activity then start your own company, don\’t surcharge for poor credit score, and write all the poor credit risks. I\’m sure you\’ll make a fortune….
Do you believe that people with high credit scores should pay less for there insurance? If so, please answer this. If 2 out of 10 people with low credit scores have accidents, and people with a high credit score have only 1 out of 10 accidents, under what logic can you explain to those 8 people without an accident that they deserve to pay more for there insurance. Please explain…..
Insurance companies would have us believe that ins scoring is not disproportionately unfair to poor people. But, have they ever told us what the average ins score of someone making 15 to 20k is? After rent and a myriad of other expenses, depending on whether or not you have children, most people will struggle to pay their bills on this income and eventually their credit score is going to suffer.
So, we have to ask ourselves do we think the poor should pay more than the rich for car insurance?
While we are at it, what are numbers based on race. Do Hispanics have more accidents? How about blacks? We have determined it to be illegal to charge a higher rate based on race, even if there is an actuarial connection. In the end maybe credit scoring isn\’t as \”fair\” as we think it is.
Also, rates should not go up with out credit scoring, the people who have good credit scores would just pay more, and the other people would pay less. Its a matter of distribution. Why would a lack of credit scoring make rates go up across the board?????
Oh yea, if you are already paying a higher amount based on the fact that your score is low and they think you MIGHT have an accident and cost the ins co more money, then isnt it like charging double when you surcharge that person for an accident that they actually do have??
Skip ins scores and increase the surcharge on accident AND even COMP claims. ADD a surcharge for the number of late payments. All of these things would be more fair.
To simple say that people with high credit scores will have fewer losses is true. The point is it is as dicriminationg as saying people under 5 feet tall have more accident becuase they are short. I have heard the typical insurance industry response if you don\’t like it go somewhere else, or start you own insurance company with only poor insurance risks. Sorry, but this arrogance by the industry does not make it right, just another business decision rationalized by power………
As an employee of the insurance industry, I would stipulate that the insurance industry as a whole does not accept credit scoring as a perfect way to underwrite risk. If it can be treated as a corollary way to analyze risk – great, but life does happen as someone indicated in another comment.
The saddest thing by far is that once your credit does take a dip – it takes YEARS to show improvement. For individuals who may already be at risk for higher rates – ie someone who suffers an unexpected unemployment or may have a catastrophic illness in the family not fully covered by health insurance – they may suffer late payments or a higher debt to income ratio, this kind of ratemaking can spell doom for that particular insured. We all know that kind of changes taking place in healthcare insurance, it could happen to most people!
Another thing to consider is that insurers are using all different sorts of credit models – what one company considers \”gold\” may merely by an average risk for another carrier. Do consumers know that with some companies – merely shopping for a good rate on a loan for your home or car can affect your credit rating?
Standardization is a bare minimum that is needed to make credit rating fair.
I can tell that several of you don\’t understand insurance credit scoring very well.
You all are aware that your insurance credit score is not the same as your regular lending credit score aren\’t you?
For example, many insurance companies exclude items such as Medical Related charges specifically for the reasons mentioned earlier in these messages and b/c they have poor predictive power. If you want to see a good example google Allstate\’s most recent credit scoring model they were forced to disclose.
Also, I think some people on here have misguided concepts of what is fair. I have built and maintained a good credit score. I don\’t think it is fair to prevent me from using that to my advantage to obtain a better insurance rate. It isn\’t my job to subsidize worse insurance risks than myself. In fact, that sounds the oppossite of fair.
If you want insurance welfare, at least do it explicity through direct government subsidization of insurance premiums for high risk insurance customers rather than the hidden taxation currently in place by way of manipulating, restricting, and regulating insurer rating plans. At least through explicit subsidization, voters can see the actual costs and vote accordingly in a demogractic fashion to either expand or contract the subsidies.
Anonymous, you have built up your credit score based on the fact that you make more money than you spend. If you were a poor person this might not be posible. So yes, you may be smarter and at an advantage due to your job and economic status, the question is do you want to use your advantage to hold poor people down, or help disadvantaged people? When your rates go down due to your credit score, they go down at the cost of higher rates for poor people and often minorities. It actually tells a lot about you as a human being.
Poor people are a burden on social services, so do we raise taxes on the poor people? It just doesnt add up, unless you are trying to create a society where the rich get richer and the poor get poorer.
Sorry guys, but show me a divorced/single mother who tries to pay her bills w/late support payments and/or a person who tries to trade in a vehicle w/a dealership who is trying to obtain financing for well over the value of a vehicle and you have a \”victim\” of poor credit ratings, even though the issue is out of her or his control… the math just doesn\’t add up and when it comes to the affluent filing less claims, may be true but when they file a claim it\’s usually for a larger amount due to the fancy car or the fancy toy that got damaged, you won\’t find a \”poor\” person driving a $40,000 vehicle or carrying high end limits, all of which can be paid out in a one-time incident causing a much larger loss to the insurance company than three or four \”poor\” credit risks claims. Still just doesn\’t add up to me
What I cannot believe is a company that insures a homeowner for 5 years then non-renews for year 6 stating that their credit score was too low to renew! 5 years without a claim and they are now a bad risk? Something is not quite right but I ended up with a new client who qualifed for a \”loss-free\” discount.. go figure!
Which 8? How about we just get rid of insurance altogether and just let people pay for their own repairs and medical bills??? Insurance is not individually priced. Similar groups are pooled together to spread the risk and cost to the benfit of the group. As a pool, the group of 10 with low credit scores are twice as likely to have an accident and should pay twice the price that the higher credit group pays.
We definately have used pooling for years, however, this pool is no more valid than race. This is called dirty pool, validity does not make it right.
This is perhaps the most sublime piece of corporate propaganda I’ve ever seen and the Oregonians Against Insurance Rate Increases sounds like ancorporate astro-turfing sham. Hey, they got the job done. They were able to convince just enough voters that black is white and white is black to make it happen. I’m a little late to the story, but Rock On corporate America!!