It would be nice if the Michigan Insurance Department knew the laws of the state so they could comply with them. The courts keep tossing their attempts to go around the acts in place. They obviously have too much money and time on their hands. No other real problems in Michigan requiring handling.
I wonder how much these insurance companies contributed to his campaigns. How ignorant of this judge to allow insurance companies to charge us higher insurance by our credit rating. When does fighting 3 types of cancer, EXTREMELY HIGH MEDICAL DEBTS THAT ARE IMPOSSIBLE TO PAY OFF, effect my driving capability. Judges like this are the problem and I hope that county gets rid of this judge asap. Its people like him that turned the constitution into WE THE CORPORATION
Obviously we still have uninformed consumers. Now while I can not speak for the entire industry, I can speak for the company that I am employed by. Using our filing, Insurnace Scoring lowers the rate of approximately 50% of our insureds. For another 40% these is no effect and yes, for 10% of the insureds there is a rate increase.
What the state of Michigan wants the industry to do is to flip flop this so that the 90% of our insureds subsidize the 10%… Sounds fair to me.
You know, I’ve thought for a few years now that someone with power in the Barry County court system was up to no good. Too many questionable things go on here that make you wonder. Parents have rights removed and children taken away with no 2nd chances or help to be better parents because they can never be a parent again here.
Now we people who actually follow the laws and carry insurance get penalized by our own court system. I want to say a big heart felt thank you to the Judge for watching out for all of us who have no control over the economy and have lousy credit scores because of it. Rest assured that from now on I will be paying closer attention when voting time rolls around and anyone that this man endorses won’t be getting my vote.
Who watches out for the little guy around here anymore? It seems that all branches of the government is the same. All they want is more money from us and then we can go to hell.
I’m with you on this one.
We lost our home because of work injuries. Our insurance has gone up and then again when our safe driver discount was removed over a stupid accident in our driveway. Don’t ask, it’s too stupid to try to explain. But, yeah…none of it counts and none of it is the insurance companies’ business. As long as they get their money, I don’t see where the problem is with having a low credit score.
Guess that is why we have so many uninured drivers.
I had offices in 3 NW states, 13 offices, never once did I find credit have anything to do with my lost ratio. Progressive started it and they all jump on the band wagon. Everyone knows you can play with per centages and make it come out to what you are looking for.
funny, how we always come back to the subject. in many cases, it’s like using the glass 1/2 full vs 1/2 empty. we claim that due to the large law of numbers, that anyone w/a low credit score are more likely to file a claim to get their car fixed so we want to charge more!! um.. is that fair?! i don’t think so. but if i have a great credit score, and i file a claim, it does not matter. it matters only if i am at-fault, no matter what credit score i have. i am surcharged, but if not placed in proper company placement, i could have a higher surcharge. so where is this a fair trade practice? i am suprised more states have not said no! most companies have a siu (special investigation unit) that can research any fraud based on indicators. but in reality a drink is a drink whether 1/2 empty or 1/2 full. so we should not be using credit scores. but insurance companies think so based on law of large numbers of data.
I know there are hard feelings towards how insurance companies price their products. However, what everyone needs to understand is this – insurance companies do their best to accurately match the risk insured with the price charged.
Insurance pricing is based on statistical analysis of past loss experience. There is a statistical correlation between lower credit scores and poorer loss ratios.
I study pricing for our company. I helped bring insurance scoring into our rating plan. Our company did not increase base rates so that we could recover the discounts offered by insurance scoring. Instead, we brought in rating factors to increase or decrease the base premium based on insurance scores.
For illustration purposes, below is a profile of actual loss ratios by insurance score band for our company’s personal auto book:
Insurance score less than 600 = 69.89%
Insurance score 600-649 = 61.55%
Insurance score 650-699 = 56.94%
Insurance score 700-749 = 49.43%
Insurance score 750-799 = 45.92%
Insurance score 800-849 = 40.42%
Insurance score 850 and over = 47.61%
You can easily see that lower insurance scores have a higher loss ratio than higher insurance scores. Without insurance scoring, higher insurance scores are paying the losses of lower insurance scores.
As previously stated, the goal of insurance is to charge a premium that is commensurate with the risk. So naturally, higher risk = higher premium. The statistics speak for themself.
I agree with DL. Companies are not required to base rates on credit scores, they do it in their overall attempt to charge based on actual risk profiles (I believe companies are in business to make money not to provide general subsidies to high-risk consumers). If it is true that credit scoring has nothing to do with risk in personal lines, it should be the case that new companies could come in and pick off the people who get higher rates only because of their credit score by not basing rates on credit score. In a competitive market you would think someone would be doing this already if it were such a great idea. I would not want to be writing those risks…
Clearly the residents of the state of Michigan are really uninformed about credit, but better yet where this whole case came from. The reason that credit is being discussed here is it’s the “rabbit” the commissioner pulled out of his hat to deny any rate increases. This is the lovely Governor “trying” to be pro-consumer by asking companies to freeze their rates and ask them to be unprofitable in a market that allows UNLIMITED PIP benefits. Imagine these people complaining about credit, when they pay $120 per vehicle on their policy to a reinsurance facility so they can continue to be the only market in the World to offer unlimited insurance benefits. That is the root of all issues in the MI insurance market place. If that changed and they actually had a normal insurance market, the average premium a customer pays would be reduced by approximately 40%. You never hear about credit in Iowa, Indiana, Ohio or any reasonable insurance market that has some of the lowest insurance premiums in the country.
I clearly see there is a difference between the 600 vs 850, BUT why is there no clear pattern? Using the example provided having a higher credit score DOES NOT justify paying less.
problem is that your stating that i am likely to file a claim and get things fixed because i have a low credit rating? but if it’s not my fault, and we have to do a um coverage… i am likely to file a claim because i want my car fixed. sometimes those with a low credit rating are looking at using the money for other things than fixing their auto. but it’s their money and they have a right to chose to spend the money elsewhere. whereas a person with a better credit rating will possibly use the money to fix their car. see we can always use a statistical reason for anything. we go back to the addage of is that glass 1/2 empty or full? we try to use it to our favor. why not the consumers favor? afterall who are we serving – ourselves or protecting our consumers?!
i think we need to get back to the basics, we are a servicing unit. customer service is lacking at times because some folks are looking at their pocket and not the customer. think about how this economy is doing. how would you rather be treated?
I see a clear pattern except over 850. Even then, the loss ratios are better than the lower scores. The slight increase over say 800 – 850 is likely due to a smaller sampling size.
I agree on the surface it’s hard to argue that the correlation makes sense, but you can’t argue the statistics or the studies (numerous ones have been done – just Google).
That said, carriers are going to have to adjust their relativities given recent economic events and their impact to people that have seen their scores decrease due solely to the credit crunch. All the studies and facts in the world won’t save credit otherwise.
I still can’t get over the fact that in most cases married males pay less than single males. I mean, I know the data may lead us to this conclusion but it doesn’t seem fair does it? If we’re throwing out the use of credit then let’s throw out other things that aren’t “consumer oriented” (like marital status) as well.
The credit data has some validity or carriers wouldn’t be breaking their necks to use it. Here’s the dilemma: How do we “fairly” use the credit variable to determine pricing for the three common group types: 1) “my credit report is filled with errors and it’s not my fault” 2)”things happened in my life that were out of my control and my credit was destroyed and it’s not my fault” and 3)”So what if I signed promissary notes and borrowed other peoples money to pay for my own stuff. I am not paying and it’s not my fault”
well, married male supposedly has more responsiblity due to family matters, whereas the single can do as he pleases.
what confuses me, is that with today’s society, why should a youthful driver, under the age of 25, male pay more for a female? good news it that in PA, it’s genderless when it comes to youth.
i know insurance looks for numbers like baseball looks at number to determine if i want a lefty or righty. where do we think that the one person might be correct, but the number tell us different.
what gets me, is the driver who loves to customize his car and his car looks better than the house! or the kids that customizes his car, but does not want good protection for him (even though he’s already spent the money on his car).
so here’s the problem. insurance is supposed to service us for our loss at time of the loss (indemnify). we can always say the law of large numbers. the problem, is that risk is not based on how bad your credit really is but on your driving record. the credit is used to supposedly, that you’ll likely to file a claim to get your car fixed more often. so, if my record is squeakly clean, but my credit score is attrocious, i might find myself in the bottom of the class. yet, my driving record could have had me in the upper class. i could have you refuse credit, which i have the right to do. then find myself in standard risk, which is better than the bottom. so, are we truly following the rules of the road? i’d be using the credit score to see if that accident was meant to cover something else.
so where do you fall, 1/2 empty, 1/2 full or just in the middle?
John – I do see a clear pattern. A higher loss ratio means that the premium is paying for more losses. The loss ratio gradually gets smaller the higher the insurance score.
There is a formula insurance companies use to figure a break-even point by matching premium, losses and expenses.
Let’s say for instance that general expenses and loss adjusting expenses make up 40% of premium. That leaves 60% of the premium to pay for losses. Compare this 60% break-even point to the actual losses and (without consideration of a meager investment income) we are actually losing money on less than 600 scores (60% – 69.89% = -9.89% loss). Whereas, we are making money on 850 and over (60% – 47.61% = 12.39% surplus). As a result, 600 scores should get a 9.89% factor load and 850 and over should get a 12.39% factor credit in order to get all insureds to the breakeven point of 60%. Everyone’s on the same playing field this way. This may be overly simplifying the numbers, but I hope it helps to understand the general statistical logic behind insurance pricing. If I was in the 850 category, I’d want the lower price. If I was in the 600 category I’d also want the lower price, but then the 850’s are paying my share of the overall risk – not fair to the 850’s.
Why do higher insurance scores have better loss ratios than lower insurance scores? I don’t know. This has been a topic of debate ever since insurance scoring has come into the rating formula. Your guess is as good as mine or anyone else’s, however, these guesses lead to unfair generalizations that do not apply to all with lower insurance scores. I realize that everyone’s financial situation is different and for different reasons. I’m not going to attempt to explain why the glass is 1/2 full or 1/2 empty – it is what it is. I just know that the statistics speak for themself.
When you review the big picture, those with a higher credit score have fewer claims. Are there exceptions – yes, there always will be…but the statistics reflect that the higher the score, the fewer claims.
Insurers have every right to use credit based information – just like a bank does. Those with a lower score do not get the best interest rate on a loan…is that unfair? Why is no one up in arms over the banking industry’s loan process? It’s because people WANT loans. People do not WANT insurance, however they are foced to purchase it by the State & to satisfy lienholders.
I have yet to have someone complain about the 45% discount they are getting with their insurance score discount. It’s the lower 10% making all the noise.
DL, you really hit the nail on the head on this one. Regardless of the predictability of the credit data, the real reason that credit is challenged by politicians & consumer groups is because there isn’t an adequate explanation of why the credit vs losses correlation even exists. So it becomes a moral or “protect the public” issue. Yes, I’ve heard the argument that people with good credit have more money and pay their own “small” collision claims, thus driving down loss ratios. However, any company product manager will tell you that as credit scores deteriorate, ALL line items (UM, PIP, BI, etc)will deteriorate as well. I don’t believe too many rich people are offering to pay BI claims.
there is a difference in loans vs insurance…. a loan is looking at the credit score because it sees the debt ratio and determines if you can pay! problem is that does not translate to insurance and risk of a claim… it be like me stating that my driving skills affects my loan and it does not!
You know Mr. Carlin, it’s not the judge’s job to write law, just interpret it. This judge did their job. If the Governor and the Insurance Department here in Michigan could get a change in the actual law instead of trying end runs all the time you would achieve more satisfaction. Of course, the majority of us would see higher insurance bills so I’m sure you would be ok with that. I would not be.
Statistics still show one’s credit reflects on potential losses.
What the courts should do, is standardize what model the insurers use. If you have a late utility bill with one company, it reflects negatively…if you have opened a new line of credit, credit card or have a new loan under 6 months old, you drop tiers with another. Each company should use a similar model instead of creating their own. As it is now, you can literally have a low score with one company and a high score with another…and fall in the middle with everyone else.
The insurance score often times reflects much more than just credit. Claims history and policy payment history are often times built into it along with literally hundreds of other variables.
Not to worry, every company which uses credit based scoring already has a back up plan in place if/when the court rules against them. It will be similar to what they have now, only without the credit report…only I’m sure base rates will be even higher then they are now.
How did you know what the credit score was in your book? I believe that Allstate was the first to use it in auto. Progressive was the first IA company to use it.
If credit works the way companies tell us that it works, then in a prefect scenario wouldn’t the actual loss ratio be the same for good credit vs bad credit. The only fluctuation would be the rate the company charges each “credit group”. Thus creating am equal loss ratio for each group type.
if they can use credit score to supposedly say that i am more likely to file a claim due to a bad credit… does that mean that my bad driving record, means more likely that i can not get a loan? um..um…um…
Stat Guy – You hit the nail on the head with that one. It’s not those getting all the insurance score discounts complaining…it’s the lower 20%. This country seems to cater more and more to the lower 20%. Mortgage bail outs, credit scoring, loan interest rates, disability checks, unemployment.
To those who wait around to get “paid” on the 3rd of the month while the rest of us actually work to make sure those disability checks keep rolling in for ya…how about picking up your fair share of things for once instead of going around with your hand out demanding what is not your’s????
It amazes me how everyone gets up in arms about the use of credit scores to find the appropriate price for an insurance risk because they think it’s unfair but at the same time, everyone LOVES banks declaring dividends because they can charge any damn interest rates they want for loans, mortgages and credit cards. Funny how insurance attempts to be more than fair to price insurance to exposure, to the possibility of a claim filing and they call that unfair at the same time, you can’t get decent treatment by any lending institution due to the turmoil in the market. This whole episode is just smoke and mirrors. As someone else said, there must be no other problems to be solved in Michigan. I, for one, want my insurance priced to ME and MY exposure; I do not want to be included in a class of people who have problems keeping their finances in order; I also don’t mind paying taxes, as long as the taxes are progressive so that all you fat cats who don’t have money for insurance, pay your FAIR share. I mean, who is worried about insurance scores except those who can’t afford it? NO, the lobby doesn’t represent those on the bottom, does it?
If I have a clean driving record, no traffic tickets and take a hit in the housing market, you have a right to increase my insurance premiums because my credit shows a judgement. How many more penalities do I have to pay?
It would be nice if the Michigan Insurance Department knew the laws of the state so they could comply with them. The courts keep tossing their attempts to go around the acts in place. They obviously have too much money and time on their hands. No other real problems in Michigan requiring handling.
I wonder how much these insurance companies contributed to his campaigns. How ignorant of this judge to allow insurance companies to charge us higher insurance by our credit rating. When does fighting 3 types of cancer, EXTREMELY HIGH MEDICAL DEBTS THAT ARE IMPOSSIBLE TO PAY OFF, effect my driving capability. Judges like this are the problem and I hope that county gets rid of this judge asap. Its people like him that turned the constitution into WE THE CORPORATION
Obviously we still have uninformed consumers. Now while I can not speak for the entire industry, I can speak for the company that I am employed by. Using our filing, Insurnace Scoring lowers the rate of approximately 50% of our insureds. For another 40% these is no effect and yes, for 10% of the insureds there is a rate increase.
What the state of Michigan wants the industry to do is to flip flop this so that the 90% of our insureds subsidize the 10%… Sounds fair to me.
You know, I’ve thought for a few years now that someone with power in the Barry County court system was up to no good. Too many questionable things go on here that make you wonder. Parents have rights removed and children taken away with no 2nd chances or help to be better parents because they can never be a parent again here.
Now we people who actually follow the laws and carry insurance get penalized by our own court system. I want to say a big heart felt thank you to the Judge for watching out for all of us who have no control over the economy and have lousy credit scores because of it. Rest assured that from now on I will be paying closer attention when voting time rolls around and anyone that this man endorses won’t be getting my vote.
Who watches out for the little guy around here anymore? It seems that all branches of the government is the same. All they want is more money from us and then we can go to hell.
I’m with you on this one.
We lost our home because of work injuries. Our insurance has gone up and then again when our safe driver discount was removed over a stupid accident in our driveway. Don’t ask, it’s too stupid to try to explain. But, yeah…none of it counts and none of it is the insurance companies’ business. As long as they get their money, I don’t see where the problem is with having a low credit score.
Guess that is why we have so many uninured drivers.
I had offices in 3 NW states, 13 offices, never once did I find credit have anything to do with my lost ratio. Progressive started it and they all jump on the band wagon. Everyone knows you can play with per centages and make it come out to what you are looking for.
funny, how we always come back to the subject. in many cases, it’s like using the glass 1/2 full vs 1/2 empty. we claim that due to the large law of numbers, that anyone w/a low credit score are more likely to file a claim to get their car fixed so we want to charge more!! um.. is that fair?! i don’t think so. but if i have a great credit score, and i file a claim, it does not matter. it matters only if i am at-fault, no matter what credit score i have. i am surcharged, but if not placed in proper company placement, i could have a higher surcharge. so where is this a fair trade practice? i am suprised more states have not said no! most companies have a siu (special investigation unit) that can research any fraud based on indicators. but in reality a drink is a drink whether 1/2 empty or 1/2 full. so we should not be using credit scores. but insurance companies think so based on law of large numbers of data.
I know there are hard feelings towards how insurance companies price their products. However, what everyone needs to understand is this – insurance companies do their best to accurately match the risk insured with the price charged.
Insurance pricing is based on statistical analysis of past loss experience. There is a statistical correlation between lower credit scores and poorer loss ratios.
I study pricing for our company. I helped bring insurance scoring into our rating plan. Our company did not increase base rates so that we could recover the discounts offered by insurance scoring. Instead, we brought in rating factors to increase or decrease the base premium based on insurance scores.
For illustration purposes, below is a profile of actual loss ratios by insurance score band for our company’s personal auto book:
Insurance score less than 600 = 69.89%
Insurance score 600-649 = 61.55%
Insurance score 650-699 = 56.94%
Insurance score 700-749 = 49.43%
Insurance score 750-799 = 45.92%
Insurance score 800-849 = 40.42%
Insurance score 850 and over = 47.61%
You can easily see that lower insurance scores have a higher loss ratio than higher insurance scores. Without insurance scoring, higher insurance scores are paying the losses of lower insurance scores.
As previously stated, the goal of insurance is to charge a premium that is commensurate with the risk. So naturally, higher risk = higher premium. The statistics speak for themself.
I agree with DL. Companies are not required to base rates on credit scores, they do it in their overall attempt to charge based on actual risk profiles (I believe companies are in business to make money not to provide general subsidies to high-risk consumers). If it is true that credit scoring has nothing to do with risk in personal lines, it should be the case that new companies could come in and pick off the people who get higher rates only because of their credit score by not basing rates on credit score. In a competitive market you would think someone would be doing this already if it were such a great idea. I would not want to be writing those risks…
Clearly the residents of the state of Michigan are really uninformed about credit, but better yet where this whole case came from. The reason that credit is being discussed here is it’s the “rabbit” the commissioner pulled out of his hat to deny any rate increases. This is the lovely Governor “trying” to be pro-consumer by asking companies to freeze their rates and ask them to be unprofitable in a market that allows UNLIMITED PIP benefits. Imagine these people complaining about credit, when they pay $120 per vehicle on their policy to a reinsurance facility so they can continue to be the only market in the World to offer unlimited insurance benefits. That is the root of all issues in the MI insurance market place. If that changed and they actually had a normal insurance market, the average premium a customer pays would be reduced by approximately 40%. You never hear about credit in Iowa, Indiana, Ohio or any reasonable insurance market that has some of the lowest insurance premiums in the country.
I clearly see there is a difference between the 600 vs 850, BUT why is there no clear pattern? Using the example provided having a higher credit score DOES NOT justify paying less.
problem is that your stating that i am likely to file a claim and get things fixed because i have a low credit rating? but if it’s not my fault, and we have to do a um coverage… i am likely to file a claim because i want my car fixed. sometimes those with a low credit rating are looking at using the money for other things than fixing their auto. but it’s their money and they have a right to chose to spend the money elsewhere. whereas a person with a better credit rating will possibly use the money to fix their car. see we can always use a statistical reason for anything. we go back to the addage of is that glass 1/2 empty or full? we try to use it to our favor. why not the consumers favor? afterall who are we serving – ourselves or protecting our consumers?!
i think we need to get back to the basics, we are a servicing unit. customer service is lacking at times because some folks are looking at their pocket and not the customer. think about how this economy is doing. how would you rather be treated?
I see a clear pattern except over 850. Even then, the loss ratios are better than the lower scores. The slight increase over say 800 – 850 is likely due to a smaller sampling size.
I agree on the surface it’s hard to argue that the correlation makes sense, but you can’t argue the statistics or the studies (numerous ones have been done – just Google).
That said, carriers are going to have to adjust their relativities given recent economic events and their impact to people that have seen their scores decrease due solely to the credit crunch. All the studies and facts in the world won’t save credit otherwise.
I still can’t get over the fact that in most cases married males pay less than single males. I mean, I know the data may lead us to this conclusion but it doesn’t seem fair does it? If we’re throwing out the use of credit then let’s throw out other things that aren’t “consumer oriented” (like marital status) as well.
The credit data has some validity or carriers wouldn’t be breaking their necks to use it. Here’s the dilemma: How do we “fairly” use the credit variable to determine pricing for the three common group types: 1) “my credit report is filled with errors and it’s not my fault” 2)”things happened in my life that were out of my control and my credit was destroyed and it’s not my fault” and 3)”So what if I signed promissary notes and borrowed other peoples money to pay for my own stuff. I am not paying and it’s not my fault”
well, married male supposedly has more responsiblity due to family matters, whereas the single can do as he pleases.
what confuses me, is that with today’s society, why should a youthful driver, under the age of 25, male pay more for a female? good news it that in PA, it’s genderless when it comes to youth.
i know insurance looks for numbers like baseball looks at number to determine if i want a lefty or righty. where do we think that the one person might be correct, but the number tell us different.
what gets me, is the driver who loves to customize his car and his car looks better than the house! or the kids that customizes his car, but does not want good protection for him (even though he’s already spent the money on his car).
so here’s the problem. insurance is supposed to service us for our loss at time of the loss (indemnify). we can always say the law of large numbers. the problem, is that risk is not based on how bad your credit really is but on your driving record. the credit is used to supposedly, that you’ll likely to file a claim to get your car fixed more often. so, if my record is squeakly clean, but my credit score is attrocious, i might find myself in the bottom of the class. yet, my driving record could have had me in the upper class. i could have you refuse credit, which i have the right to do. then find myself in standard risk, which is better than the bottom. so, are we truly following the rules of the road? i’d be using the credit score to see if that accident was meant to cover something else.
so where do you fall, 1/2 empty, 1/2 full or just in the middle?
Apparently this insurance commissioner isn’t into kissing up to insurance companies, unlike the new one in Delaware who owes them her election.
John – I do see a clear pattern. A higher loss ratio means that the premium is paying for more losses. The loss ratio gradually gets smaller the higher the insurance score.
There is a formula insurance companies use to figure a break-even point by matching premium, losses and expenses.
Let’s say for instance that general expenses and loss adjusting expenses make up 40% of premium. That leaves 60% of the premium to pay for losses. Compare this 60% break-even point to the actual losses and (without consideration of a meager investment income) we are actually losing money on less than 600 scores (60% – 69.89% = -9.89% loss). Whereas, we are making money on 850 and over (60% – 47.61% = 12.39% surplus). As a result, 600 scores should get a 9.89% factor load and 850 and over should get a 12.39% factor credit in order to get all insureds to the breakeven point of 60%. Everyone’s on the same playing field this way. This may be overly simplifying the numbers, but I hope it helps to understand the general statistical logic behind insurance pricing. If I was in the 850 category, I’d want the lower price. If I was in the 600 category I’d also want the lower price, but then the 850’s are paying my share of the overall risk – not fair to the 850’s.
Why do higher insurance scores have better loss ratios than lower insurance scores? I don’t know. This has been a topic of debate ever since insurance scoring has come into the rating formula. Your guess is as good as mine or anyone else’s, however, these guesses lead to unfair generalizations that do not apply to all with lower insurance scores. I realize that everyone’s financial situation is different and for different reasons. I’m not going to attempt to explain why the glass is 1/2 full or 1/2 empty – it is what it is. I just know that the statistics speak for themself.
When you review the big picture, those with a higher credit score have fewer claims. Are there exceptions – yes, there always will be…but the statistics reflect that the higher the score, the fewer claims.
Insurers have every right to use credit based information – just like a bank does. Those with a lower score do not get the best interest rate on a loan…is that unfair? Why is no one up in arms over the banking industry’s loan process? It’s because people WANT loans. People do not WANT insurance, however they are foced to purchase it by the State & to satisfy lienholders.
I have yet to have someone complain about the 45% discount they are getting with their insurance score discount. It’s the lower 10% making all the noise.
DL, you really hit the nail on the head on this one. Regardless of the predictability of the credit data, the real reason that credit is challenged by politicians & consumer groups is because there isn’t an adequate explanation of why the credit vs losses correlation even exists. So it becomes a moral or “protect the public” issue. Yes, I’ve heard the argument that people with good credit have more money and pay their own “small” collision claims, thus driving down loss ratios. However, any company product manager will tell you that as credit scores deteriorate, ALL line items (UM, PIP, BI, etc)will deteriorate as well. I don’t believe too many rich people are offering to pay BI claims.
there is a difference in loans vs insurance…. a loan is looking at the credit score because it sees the debt ratio and determines if you can pay! problem is that does not translate to insurance and risk of a claim… it be like me stating that my driving skills affects my loan and it does not!
You know Mr. Carlin, it’s not the judge’s job to write law, just interpret it. This judge did their job. If the Governor and the Insurance Department here in Michigan could get a change in the actual law instead of trying end runs all the time you would achieve more satisfaction. Of course, the majority of us would see higher insurance bills so I’m sure you would be ok with that. I would not be.
Statistics still show one’s credit reflects on potential losses.
What the courts should do, is standardize what model the insurers use. If you have a late utility bill with one company, it reflects negatively…if you have opened a new line of credit, credit card or have a new loan under 6 months old, you drop tiers with another. Each company should use a similar model instead of creating their own. As it is now, you can literally have a low score with one company and a high score with another…and fall in the middle with everyone else.
The insurance score often times reflects much more than just credit. Claims history and policy payment history are often times built into it along with literally hundreds of other variables.
Not to worry, every company which uses credit based scoring already has a back up plan in place if/when the court rules against them. It will be similar to what they have now, only without the credit report…only I’m sure base rates will be even higher then they are now.
How did you know what the credit score was in your book? I believe that Allstate was the first to use it in auto. Progressive was the first IA company to use it.
If credit works the way companies tell us that it works, then in a prefect scenario wouldn’t the actual loss ratio be the same for good credit vs bad credit. The only fluctuation would be the rate the company charges each “credit group”. Thus creating am equal loss ratio for each group type.
well, here’s the interesting scenario:
if they can use credit score to supposedly say that i am more likely to file a claim due to a bad credit… does that mean that my bad driving record, means more likely that i can not get a loan? um..um…um…
Stat Guy – You hit the nail on the head with that one. It’s not those getting all the insurance score discounts complaining…it’s the lower 20%. This country seems to cater more and more to the lower 20%. Mortgage bail outs, credit scoring, loan interest rates, disability checks, unemployment.
To those who wait around to get “paid” on the 3rd of the month while the rest of us actually work to make sure those disability checks keep rolling in for ya…how about picking up your fair share of things for once instead of going around with your hand out demanding what is not your’s????
Sound likes KS,STAT GUY, wants to bring back debtors prisons and build minuments to the gang at AIG..
It amazes me how everyone gets up in arms about the use of credit scores to find the appropriate price for an insurance risk because they think it’s unfair but at the same time, everyone LOVES banks declaring dividends because they can charge any damn interest rates they want for loans, mortgages and credit cards. Funny how insurance attempts to be more than fair to price insurance to exposure, to the possibility of a claim filing and they call that unfair at the same time, you can’t get decent treatment by any lending institution due to the turmoil in the market. This whole episode is just smoke and mirrors. As someone else said, there must be no other problems to be solved in Michigan. I, for one, want my insurance priced to ME and MY exposure; I do not want to be included in a class of people who have problems keeping their finances in order; I also don’t mind paying taxes, as long as the taxes are progressive so that all you fat cats who don’t have money for insurance, pay your FAIR share. I mean, who is worried about insurance scores except those who can’t afford it? NO, the lobby doesn’t represent those on the bottom, does it?
Insurance companies
If I have a clean driving record, no traffic tickets and take a hit in the housing market, you have a right to increase my insurance premiums because my credit shows a judgement. How many more penalities do I have to pay?