Insurance I thought was designed to spread the risk over the massess so all could be insured. Losses we never had or may have in the future predicted bt a credit score may be the industry’s answer to automated writing of insurance without much need for an agent. If the companies are going to write the risks the exposure remains the same for the total but scoring individualizes the pricing for the components of the risk. This is a step away from the spread of risk as those presented by the greatest pricing may avoid coverage all together but yet the risk still remains to be paid by fewer policies. Have any of you had a policy pay on a first party basis because the claim was caused by an uninsured? If the first advantage of scoring were admitted we may find it is to completly automate the insurance industry making the products as any other commodity while diminishing further the nperceived need of an agent in the process. Every ones thoughts please.
Bluemax, I see you got all dislikes on your posting. I think you’ve been misunderstood. I agree completely with your post. Direct direct companies like GEICO and USAA became and remain some of the largest auto carriers in the industry and much of it is due to cutting the underwriting expense (cutting out agents and underwriters) by achieving profitable loss experience through the use of credit.
I think only those ignorant of the facts would argue that credit does not have a correlation with future loss cost. It’s really no longer a question of does it work, but do we as a society benefit from its implementation? It does not make sense to me that we demand our legislatures pass financial responsibility laws to make financially irresponsible people buy insurance but then permit companies to raise rates on the financially irresponsible so they are more likely to remain financially irresponsible.
Dear Bluemax, the intent of credit scoring is to predict those with poor social, moral behavior who will, in one way or another, cause a loss or be a poor payer. It has nothing to do with automation. Would you loan your car to someone who has had two or three DWI’s on their MVR? Didn’t think so. That is credit scoring.
Predictive modeling is a component in price setting for all insurance policies. Predictive modeling requirements are more than just age, sex, loss history and location but also include fraud factors like education and credit.
Since credit scoring is expensive for insurers to use, if it were not predictive, they would not use it; cost/benefit analysis would identify this pretty quickly.
In the absence of credit scoring in the modeling process, risk location carries more weight and wouldn’t change the current climate in PG and Baltimore Counties. I have driven extensively in those counties in the past and the rates are justifiably high.
As far as the assertion that credit scoring is designed to eliminate the agent from the equation, the agent’s observations and knowledge are also a sound underwriting tool and can give insurers information about a potential risk that is not obvious through other means. An example would be; who drove the car to the office to buy the policy, the prospect or their boyfriend, something that would not be uncovered any other way.
What you say is THEORETICALLY credible, but is BS when it comes to application. And you would know it if you were involved in application. Correlation exists in any large data set. The industry has NEVER shown correlation to future insurance risk/losses. They have only shown correlation to past claims history.
Tell ya what. If the industry starts collecting data on the color of the shoes that insureds are wearing and I guarantee that they can similarly show that red shoes are “predictive” of higher insurance loss while those wearing black shoes are better insurance loss.
Bob,
How do you correlate anything to future losses without using past experience?
Should everyone pay the same premium regardless of age, gender, credit, location? Why should an excellent 18 year old driver pay more than a 50 year old excellent driver? How can an insurance company discern the difference at the time of application? Some can make the argument that someone with no accidents is “due” and someone else who had an accident has learned their lesson and become a much better driver. Should we also take out driving experience as a variable?
Credit is only a portion of predictive modeling. The more variables used to segment risks, the less good risks will pay and the more poor risks will pay. Can you get any more fair than people paying the proper premium in relation to their risk of loss?
Bob,
I work in the insurance industry and have personally done predictive modeling on auto loss data. First of all, it is important that everyone understands that the insurance credit score is NOT the FICO score used in banking. It is a score that was specifically designed for insurance meaning that any behaviors that aren’t predictive of future insurance claims are not included. It isn’t a prediction of how likely you will honor your financial contracts but rather of how likely you are to cause damage to another person’s property or body. I can attest that the insurance credit score is predictive of FUTURE losses. This is true even when adjusting for age, location, vehicle make/model, and dozens of other variables. In fact, an independent study (by the FTC, I think) concluded that drivers with lower insurance scores have more accidents and those accidents cost more than drivers with high insurance scores. Also, they did not any find any replacement for the information that an insurance score provides. Using insurance credit scores isn’t a trick to get more premium since more than half of people see no change or a decrease in premium as a result of their insurance score. People who are careless in their driving destroy lives, cause great pain and financial damage. Shouldn’t they pay for the costs they pose to society? Insurance credit scores are invaluable in identifying those people.
Ryan, your admission of working on predictive modeling shows your bias. You either work for the insurance companies directly looking for ways to squeeze money out of the pockets of lower income people, or your work for the vulture companies which sell indviduals’ credit information. You seek not truth through science, but rather profit through voodoo magic.
The more variables you add to any model guarantees with less certainty exactly which variable most affected a certain outcome. As it stands most insurance companies use so many variables, they can generate more unique outcomes than there are people on the planet. So what do they do, insurers pick and choose from the multitude of scenarios specifically to generate the highest income while at the same time limiting the insurers’ exposure.
How do insurers limit exposure? You look for a large class of people containg a large number of responsible drivers. Then you artificially jack up their rates (credit scoring). This in turns forces lower income people to cut their coverage, and in turn limits the exposure to the insurance companies.
For example, if one determines rates by age class and driving records only – rich man or poor man should pay the same rates for the same liability, comp, and collision coverage. So how do the insurers maximize the profits?
First insurers take a quick look see which is the largest class. With a shrinking middle class and a growing lower class the target is simple. The idea is to drive up the rates on the lower income class, which in turn causes the lower class to minimize its coverage. This in turn works to minimize the exposure to the insurance companies.
I have personally seen drivers having tickets and accidents on their record, yet because they have a good credit score they will pay less in insurance on their newer model car while carrying higher liability limits along with comp and collision, than a driver with an unblemished driving record carrying state minimums on a liability only policy.
The simple matter is, credit scoring is used as a mechanism to force a very large number of safe drivers to pay higher rates while at the same time lowering the exposure of the insurers.
In theory state insurance commissioners have to answer to “the people” about fairness. The insurers worked around this by creating self serving flawed “scientific” studies. In turn the commissioners rubber stamp the studies telling their constituents science proves insurers can predict with certainty the future.
Its funny how only insurance companies can predict the future.
I’d bet that you don’t work in insurance or you would know how it is actually used; given predictive modeling, underwriters can find a price for risks that would otherwise be rejected. We expanded our offerings by finding new pricing levels for ALL risks. This means that while some folks find their rates going up, others are moving downward. This is because the pool is now larger; it is easier to spread the risk when you have a larger group. This is not a tool to penalize anyone. You are correct that a correlation can only be made to the past claims history but you missed the boat if you think that a correlation cannot be made to “PROBABLE” future risk/losses. That is the point, that it can be predictive of future losses, not a guarantee. It is used to predict the outcome for the whole group, not individuals. And with a larger data set, pricing doesn’t spike but instead levels out. Those who would be rejected or sent to assigned riskwhere the premiums are capped and which also means others “share” in subsidizing poor risks. With predictive modeling, we use all the tools to evaluate risk to find a price that fits their individual experience. And your analogy of shoes does not carry water unless you can first demonstrate that a relationship exists at all. that type of “predictive analysis” is called superstition. There is no correlation between wearing shoes and losses; the only thing you could predict is that those who suffer a loss probably had shoes on. But the correlation between credit score and claims behavior has been confirmed; but those who like conspiracies will always ignore FACTS. You are probably one of those who think this isn’t “FAIR”. Would benefit from the current subsidized market? Answer this: why should insurance be fair? Should we all get paid the same wage, to make it fair for everyone?
Credit scores for auto insurance is a rip off by the insurance industry, the info. they provide to the Legislature is call “MUD” made up data. This outfit which is called property casualty insurance association of america are nothing but paid lobbies for the insurance industry. They where in Nevada with same PONY AND DOG ACT.
Yes, PCIAA is a lobby. You have an assumption that a lobby is a bad thing but you don’t offer any reason for me to believe that. I doubt if you did much research on credit scoring. You just have that knee jerk reaction because you fear that credit scoring will affect you negatively. I’ll bet that you don’t UNDERSTAND how credit scores are used and what their effect is on individual policyholders. People fear what they don’t understand. Do the reseach before you offer your opinions.
The end result will be just like Florida. The “compromise” will be that insurance companies can’t use credit by itself. Both sides will claim victory and the consumer looses again. Credit scoring is just a tool to generate additional premium.
Those that claim it is a ripoff are simply ignorant. There is a finite amount of claims and sufficient premium must be collected to pay those claims and all the expenses associated with paying claims and collecting premium. The idea of insurance is to create a homogenous pool of customers and have them share the risk inside their pool. Some is this is simple, like a 16 year old should be grouped with other 16 year olds. The 16 year olds that drive a Taurus should pay less than the one with a 5.0 liter Mustang. The point is, a private company should be able to create the homogenous pools they believe is the most predictive…don’t forget, it is THEIR capital at risk! Do we tell Walmart how much they can charge for a can of corn? No, they need to determine that…it is no different, just more complicated. Denis and others, if you don’t understand it, shut up.
The correlation between bad credit history and expected bad claims experience is undeniable and strong. No doubt it is not fair in those cases where an individual has a poor credit history but is a careful driver. For that reason, there should be a limit as how much weight may be given to the credit history so as not to unfairly penalize someone on the assumption he fits he model when in fact he doesn’t. However, as a careful driver and one who pays my bills on time, I do not want to subsidize careless drivers through higher insurance premiums because this valuable predictive tool is not available at all. I should not be punished by having to pay higher just so some liberal legislator can grandstand and get himself re-elected by meddling in a process h does not understand.
Mark you are almost 100% correct. However, your comment “No doubt it is not fair in those cases where an individual has a poor credit history but is a careful driver” is a bit off base. For example, there are some 16 year old drivers that are more careful than others, but for purposes of insurance pricing they have to be lumped together for the “age” rating variable. A poor credit individual driving a safe car, with no accidents or violations will still be better priced than one with accidents and violations and or an unsafe car.
Clearly you feel that subsidization is antithetical to fairness.
In the absence of credit scoring as a rating variable obviously people with higher credit scores will pay for some of the losses of people with lower credit scores. The question is whether that is fair.
This whole credit scoring issue would probably be less contentious if we could actually find the casual variables underlying the correlation with losses. I don’t think anyone would make the claim that credit scores actually cause an increase in the frequency or severity of losses. The best explanation I have heard is that they might partially be a proxy for willingness to take risks.
Does anyone have any other good guesses as to what the underlying causal variables are?
TERRY the state does not require you buy a can of corn, but it does require you to have auto insurance, by the way does walmart sell auto insurace if it does the company is probly out of china!!!!
One of the more hidden problems with the use of CREDIT SCORING per se is the social implication applied -poor credit equals poor risk equals higher pricing. One factor does not necessarily equate to others. We are not all the SAME when it comes to driving, money, society and that is a fact. Predictive modeling, like many other theories lumps a class. In truth, liars figure and figures, lie. Stats are used continuously to justify means. Greed is a great equalizeer so when Inssurance companies per se figure anoter way to increase profits, they do so. Just like the Banking industry intheir innoviative methods to get around interest and credit limitations despite laws which intend the opposite affect.
It is one thing for a insurance organization to say they will not write your insurance because of your age or driving record than to say I will write you but marked up because, you might be more succeptible to not pay a bill or bills in the future because you once did so. How ironic to be told what your social class predicts what you are worth in premiums.
And for all these comments relative to claim correlation from those who never worked in that field; yes I have, if a person is really a bad actor, driver then, like many non-standard auto companies do, insure them as such without the rest of the BS.
Credit based scoring is a SCAM and when companies use this guy of information to justify why they raised your premiums….not because of your claim or drive record it is truly despicable. And please, do not say that does not happen since you agents absolutely do know from customer complaints that it does.
Wow, Bob, please get a grip. Credit and future loss correlation is manipulated by statistics, just get the right group to show what you want shown. Nothing new or different with that approach. And the two companies you list for examples to support your unsupportable proposition both specialized in the higher end policyholder; both also originally in government-based civilian or military employment. So, here is how this works for them: Isolate a pool, have the government screen it initially for you and then take the top percentage. Credit scoring, nay, select underwriting I think. Or, social engineering at its finest, right? Not sure this is really insurance at all. Credit scoring is a misnomer in my opinion and from my perespective with claims in various parts of the country.
Point taken on GEICO and USAA but the rest of your post sounds more like it is based on a conspiracy theory rather than actuarial science. However, it looks like we both agree that credit should not be allowed.
Bob , thanks for your comments but no, not linking any conspiracy per se but do believe from my experiences in claims and as a rational human…most of the time anyway, that insurance companies are using social manipulation to garner increased revenues—like the use of credit to increase premiums. Like you I do not believe that should be allowed. And I do not believe you can disagree that banks and credit card companies per se have and or doing everything possible to increase their percentage loan rates on cards along with charging for anything possible. Not a conspiracy here but just an intended business effort of in my words, greed. There is also no question that the middle class has lost tremendously since the 1980’s and the rich get richer and the rest, well, we don’t. So rather than call these matters consparicies, just express them as greed via smoke screens.
Anyway, appreciate your comments and insurance companies should not be involved with credit manipulations.
Credit scoring continues to be debated by the public, our industry and its regulators. My read on it from a claims perspective is simply it is a tool for some-those, who per the credit function have a low score, pay more for automobile insurance. No other reason need to be given and is not given for the higher rate and I have seen company letters explaining to their customers, as I attempted to adjust, investigate or settle the claim for which I have appeared, just that…your credit score is low and thus you are a higher risk. Oh, really…sounds like a crock to me.
Really do companies go into why a person may or does have a low credit score -unemployment, health, financial losses, family tragedies, etc., real life. So, to me, although it is claimed to be used only as another ‘tool’ in reality it is the tool used to increase the premium rate whenever or wherever possible.
As I wrote before, liars figure and figures lie; or is it the reverse? Regardless the results do not protect those already down.
What’s new.
Insurance I thought was designed to spread the risk over the massess so all could be insured. Losses we never had or may have in the future predicted bt a credit score may be the industry’s answer to automated writing of insurance without much need for an agent. If the companies are going to write the risks the exposure remains the same for the total but scoring individualizes the pricing for the components of the risk. This is a step away from the spread of risk as those presented by the greatest pricing may avoid coverage all together but yet the risk still remains to be paid by fewer policies. Have any of you had a policy pay on a first party basis because the claim was caused by an uninsured? If the first advantage of scoring were admitted we may find it is to completly automate the insurance industry making the products as any other commodity while diminishing further the nperceived need of an agent in the process. Every ones thoughts please.
Bluemax, I see you got all dislikes on your posting. I think you’ve been misunderstood. I agree completely with your post. Direct direct companies like GEICO and USAA became and remain some of the largest auto carriers in the industry and much of it is due to cutting the underwriting expense (cutting out agents and underwriters) by achieving profitable loss experience through the use of credit.
I think only those ignorant of the facts would argue that credit does not have a correlation with future loss cost. It’s really no longer a question of does it work, but do we as a society benefit from its implementation? It does not make sense to me that we demand our legislatures pass financial responsibility laws to make financially irresponsible people buy insurance but then permit companies to raise rates on the financially irresponsible so they are more likely to remain financially irresponsible.
This legislation proudly brought to you by Barney Frank and Chris Dodd, founders credit scoring system that brought us the mortgage crisis.
Dear Bluemax, the intent of credit scoring is to predict those with poor social, moral behavior who will, in one way or another, cause a loss or be a poor payer. It has nothing to do with automation. Would you loan your car to someone who has had two or three DWI’s on their MVR? Didn’t think so. That is credit scoring.
Predictive modeling is a component in price setting for all insurance policies. Predictive modeling requirements are more than just age, sex, loss history and location but also include fraud factors like education and credit.
Since credit scoring is expensive for insurers to use, if it were not predictive, they would not use it; cost/benefit analysis would identify this pretty quickly.
In the absence of credit scoring in the modeling process, risk location carries more weight and wouldn’t change the current climate in PG and Baltimore Counties. I have driven extensively in those counties in the past and the rates are justifiably high.
As far as the assertion that credit scoring is designed to eliminate the agent from the equation, the agent’s observations and knowledge are also a sound underwriting tool and can give insurers information about a potential risk that is not obvious through other means. An example would be; who drove the car to the office to buy the policy, the prospect or their boyfriend, something that would not be uncovered any other way.
Wayne,
What you say is THEORETICALLY credible, but is BS when it comes to application. And you would know it if you were involved in application. Correlation exists in any large data set. The industry has NEVER shown correlation to future insurance risk/losses. They have only shown correlation to past claims history.
Tell ya what. If the industry starts collecting data on the color of the shoes that insureds are wearing and I guarantee that they can similarly show that red shoes are “predictive” of higher insurance loss while those wearing black shoes are better insurance loss.
In the end, it is all a BS and you know it.
Bob,
How do you correlate anything to future losses without using past experience?
Should everyone pay the same premium regardless of age, gender, credit, location? Why should an excellent 18 year old driver pay more than a 50 year old excellent driver? How can an insurance company discern the difference at the time of application? Some can make the argument that someone with no accidents is “due” and someone else who had an accident has learned their lesson and become a much better driver. Should we also take out driving experience as a variable?
Credit is only a portion of predictive modeling. The more variables used to segment risks, the less good risks will pay and the more poor risks will pay. Can you get any more fair than people paying the proper premium in relation to their risk of loss?
Bob,
I work in the insurance industry and have personally done predictive modeling on auto loss data. First of all, it is important that everyone understands that the insurance credit score is NOT the FICO score used in banking. It is a score that was specifically designed for insurance meaning that any behaviors that aren’t predictive of future insurance claims are not included. It isn’t a prediction of how likely you will honor your financial contracts but rather of how likely you are to cause damage to another person’s property or body. I can attest that the insurance credit score is predictive of FUTURE losses. This is true even when adjusting for age, location, vehicle make/model, and dozens of other variables. In fact, an independent study (by the FTC, I think) concluded that drivers with lower insurance scores have more accidents and those accidents cost more than drivers with high insurance scores. Also, they did not any find any replacement for the information that an insurance score provides. Using insurance credit scores isn’t a trick to get more premium since more than half of people see no change or a decrease in premium as a result of their insurance score. People who are careless in their driving destroy lives, cause great pain and financial damage. Shouldn’t they pay for the costs they pose to society? Insurance credit scores are invaluable in identifying those people.
Ryan, your admission of working on predictive modeling shows your bias. You either work for the insurance companies directly looking for ways to squeeze money out of the pockets of lower income people, or your work for the vulture companies which sell indviduals’ credit information. You seek not truth through science, but rather profit through voodoo magic.
The more variables you add to any model guarantees with less certainty exactly which variable most affected a certain outcome. As it stands most insurance companies use so many variables, they can generate more unique outcomes than there are people on the planet. So what do they do, insurers pick and choose from the multitude of scenarios specifically to generate the highest income while at the same time limiting the insurers’ exposure.
How do insurers limit exposure? You look for a large class of people containg a large number of responsible drivers. Then you artificially jack up their rates (credit scoring). This in turns forces lower income people to cut their coverage, and in turn limits the exposure to the insurance companies.
For example, if one determines rates by age class and driving records only – rich man or poor man should pay the same rates for the same liability, comp, and collision coverage. So how do the insurers maximize the profits?
First insurers take a quick look see which is the largest class. With a shrinking middle class and a growing lower class the target is simple. The idea is to drive up the rates on the lower income class, which in turn causes the lower class to minimize its coverage. This in turn works to minimize the exposure to the insurance companies.
I have personally seen drivers having tickets and accidents on their record, yet because they have a good credit score they will pay less in insurance on their newer model car while carrying higher liability limits along with comp and collision, than a driver with an unblemished driving record carrying state minimums on a liability only policy.
The simple matter is, credit scoring is used as a mechanism to force a very large number of safe drivers to pay higher rates while at the same time lowering the exposure of the insurers.
In theory state insurance commissioners have to answer to “the people” about fairness. The insurers worked around this by creating self serving flawed “scientific” studies. In turn the commissioners rubber stamp the studies telling their constituents science proves insurers can predict with certainty the future.
Its funny how only insurance companies can predict the future.
Wayne, the word that best describes you is “clueless”. I am sure you have some skills in something, but insurance pricing ain’t one of them.
I’d bet that you don’t work in insurance or you would know how it is actually used; given predictive modeling, underwriters can find a price for risks that would otherwise be rejected. We expanded our offerings by finding new pricing levels for ALL risks. This means that while some folks find their rates going up, others are moving downward. This is because the pool is now larger; it is easier to spread the risk when you have a larger group. This is not a tool to penalize anyone. You are correct that a correlation can only be made to the past claims history but you missed the boat if you think that a correlation cannot be made to “PROBABLE” future risk/losses. That is the point, that it can be predictive of future losses, not a guarantee. It is used to predict the outcome for the whole group, not individuals. And with a larger data set, pricing doesn’t spike but instead levels out. Those who would be rejected or sent to assigned riskwhere the premiums are capped and which also means others “share” in subsidizing poor risks. With predictive modeling, we use all the tools to evaluate risk to find a price that fits their individual experience. And your analogy of shoes does not carry water unless you can first demonstrate that a relationship exists at all. that type of “predictive analysis” is called superstition. There is no correlation between wearing shoes and losses; the only thing you could predict is that those who suffer a loss probably had shoes on. But the correlation between credit score and claims behavior has been confirmed; but those who like conspiracies will always ignore FACTS. You are probably one of those who think this isn’t “FAIR”. Would benefit from the current subsidized market? Answer this: why should insurance be fair? Should we all get paid the same wage, to make it fair for everyone?
Credit scores for auto insurance is a rip off by the insurance industry, the info. they provide to the Legislature is call “MUD” made up data. This outfit which is called property casualty insurance association of america are nothing but paid lobbies for the insurance industry. They where in Nevada with same PONY AND DOG ACT.
Yes, PCIAA is a lobby. You have an assumption that a lobby is a bad thing but you don’t offer any reason for me to believe that. I doubt if you did much research on credit scoring. You just have that knee jerk reaction because you fear that credit scoring will affect you negatively. I’ll bet that you don’t UNDERSTAND how credit scores are used and what their effect is on individual policyholders. People fear what they don’t understand. Do the reseach before you offer your opinions.
The end result will be just like Florida. The “compromise” will be that insurance companies can’t use credit by itself. Both sides will claim victory and the consumer looses again. Credit scoring is just a tool to generate additional premium.
Those that claim it is a ripoff are simply ignorant. There is a finite amount of claims and sufficient premium must be collected to pay those claims and all the expenses associated with paying claims and collecting premium. The idea of insurance is to create a homogenous pool of customers and have them share the risk inside their pool. Some is this is simple, like a 16 year old should be grouped with other 16 year olds. The 16 year olds that drive a Taurus should pay less than the one with a 5.0 liter Mustang. The point is, a private company should be able to create the homogenous pools they believe is the most predictive…don’t forget, it is THEIR capital at risk! Do we tell Walmart how much they can charge for a can of corn? No, they need to determine that…it is no different, just more complicated. Denis and others, if you don’t understand it, shut up.
The correlation between bad credit history and expected bad claims experience is undeniable and strong. No doubt it is not fair in those cases where an individual has a poor credit history but is a careful driver. For that reason, there should be a limit as how much weight may be given to the credit history so as not to unfairly penalize someone on the assumption he fits he model when in fact he doesn’t. However, as a careful driver and one who pays my bills on time, I do not want to subsidize careless drivers through higher insurance premiums because this valuable predictive tool is not available at all. I should not be punished by having to pay higher just so some liberal legislator can grandstand and get himself re-elected by meddling in a process h does not understand.
Mark you are almost 100% correct. However, your comment “No doubt it is not fair in those cases where an individual has a poor credit history but is a careful driver” is a bit off base. For example, there are some 16 year old drivers that are more careful than others, but for purposes of insurance pricing they have to be lumped together for the “age” rating variable. A poor credit individual driving a safe car, with no accidents or violations will still be better priced than one with accidents and violations and or an unsafe car.
I think Stat Guy touched upon the most interesting subtopic in this whole debate.
“Answer this: why should insurance be fair?”
Also interesting was the recent European ruling that insurance companies can no longer use gender as a rating variable. How fascinating!
You mean “how stupid”. Any lost rating variable, either through inability to get data or corrupt politicians, mean subsidizations.
Clearly you feel that subsidization is antithetical to fairness.
In the absence of credit scoring as a rating variable obviously people with higher credit scores will pay for some of the losses of people with lower credit scores. The question is whether that is fair.
This whole credit scoring issue would probably be less contentious if we could actually find the casual variables underlying the correlation with losses. I don’t think anyone would make the claim that credit scores actually cause an increase in the frequency or severity of losses. The best explanation I have heard is that they might partially be a proxy for willingness to take risks.
Does anyone have any other good guesses as to what the underlying causal variables are?
TERRY the state does not require you buy a can of corn, but it does require you to have auto insurance, by the way does walmart sell auto insurace if it does the company is probly out of china!!!!
One of the more hidden problems with the use of CREDIT SCORING per se is the social implication applied -poor credit equals poor risk equals higher pricing. One factor does not necessarily equate to others. We are not all the SAME when it comes to driving, money, society and that is a fact. Predictive modeling, like many other theories lumps a class. In truth, liars figure and figures, lie. Stats are used continuously to justify means. Greed is a great equalizeer so when Inssurance companies per se figure anoter way to increase profits, they do so. Just like the Banking industry intheir innoviative methods to get around interest and credit limitations despite laws which intend the opposite affect.
It is one thing for a insurance organization to say they will not write your insurance because of your age or driving record than to say I will write you but marked up because, you might be more succeptible to not pay a bill or bills in the future because you once did so. How ironic to be told what your social class predicts what you are worth in premiums.
And for all these comments relative to claim correlation from those who never worked in that field; yes I have, if a person is really a bad actor, driver then, like many non-standard auto companies do, insure them as such without the rest of the BS.
Credit based scoring is a SCAM and when companies use this guy of information to justify why they raised your premiums….not because of your claim or drive record it is truly despicable. And please, do not say that does not happen since you agents absolutely do know from customer complaints that it does.
Fair is fair. This is not so. Just my opinion.
Wow, Bob, please get a grip. Credit and future loss correlation is manipulated by statistics, just get the right group to show what you want shown. Nothing new or different with that approach. And the two companies you list for examples to support your unsupportable proposition both specialized in the higher end policyholder; both also originally in government-based civilian or military employment. So, here is how this works for them: Isolate a pool, have the government screen it initially for you and then take the top percentage. Credit scoring, nay, select underwriting I think. Or, social engineering at its finest, right? Not sure this is really insurance at all. Credit scoring is a misnomer in my opinion and from my perespective with claims in various parts of the country.
Point taken on GEICO and USAA but the rest of your post sounds more like it is based on a conspiracy theory rather than actuarial science. However, it looks like we both agree that credit should not be allowed.
Bob , thanks for your comments but no, not linking any conspiracy per se but do believe from my experiences in claims and as a rational human…most of the time anyway, that insurance companies are using social manipulation to garner increased revenues—like the use of credit to increase premiums. Like you I do not believe that should be allowed. And I do not believe you can disagree that banks and credit card companies per se have and or doing everything possible to increase their percentage loan rates on cards along with charging for anything possible. Not a conspiracy here but just an intended business effort of in my words, greed. There is also no question that the middle class has lost tremendously since the 1980’s and the rich get richer and the rest, well, we don’t. So rather than call these matters consparicies, just express them as greed via smoke screens.
Anyway, appreciate your comments and insurance companies should not be involved with credit manipulations.
Credit scoring continues to be debated by the public, our industry and its regulators. My read on it from a claims perspective is simply it is a tool for some-those, who per the credit function have a low score, pay more for automobile insurance. No other reason need to be given and is not given for the higher rate and I have seen company letters explaining to their customers, as I attempted to adjust, investigate or settle the claim for which I have appeared, just that…your credit score is low and thus you are a higher risk. Oh, really…sounds like a crock to me.
Really do companies go into why a person may or does have a low credit score -unemployment, health, financial losses, family tragedies, etc., real life. So, to me, although it is claimed to be used only as another ‘tool’ in reality it is the tool used to increase the premium rate whenever or wherever possible.
As I wrote before, liars figure and figures lie; or is it the reverse? Regardless the results do not protect those already down.
What’s new.