In the largest and reportedly most comprehensive study ever undertaken on the connection between credit history and insurance risk, a team of researchers has found that a consumer’s credit-based insurance score is unquestionably correlated to that consumer’s propensity for auto insurance loss. The study found that insurance scores are consistently among the most important rating variables used by insurers. Results of the study were presented over the weekend to the National Association of Insurance Commissioners (NAIC) at the group’s summer meeting. The study, conducted by EPIC Actuaries LLC on behalf of the property/casualty insurance industry’s four national trade associations, was based on a countrywide sample of nearly 2.7 million automobiles. By contrast, a recent study by University of Texas researchers examined approximately 150,000 records in Texas only. Results of the EPIC study are consistent across the country, from state to state and region to region, the actuaries found.
Among the study’s major findings:
• Insurance scores were found to be among the three most important risk factors for each of the six types of coverage included in the study, based on a statistical measure of the relative impact of the various risk factors on insurance consumers.
• The propensity of loss is significantly different from one insurance score group to the next and insurance scores are highly correlated with the propensity for loss. As a general rule, the higher the insurance score, the lower the propensity for loss for each automobile insurance coverage.
• After fully accounting for all overlap and relationship with other risk factors, insurance scores are significantly related to loss propensity and increase the accuracy of the risk assessment process.
The study was conducted on behalf of the Alliance of American Insurers, the American Insurance Association, the National Association of Independent Insurers and the National Association of Mutual Insurance Companies.
Topics Claims
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