The National Auto Agents Alliance recently issued a statement that credit scoring is “unreliable, inaccurate, and so against public interest as to endanger the insurance industry to the wrath of the public.”
In a letter to Georgia Commissioner of Insurance John W. Oxendine, NAAA President James W. Holthaus commended the commissioner’s plan to investigate the use of credit scores for underwriting and/or rate determination in Georgia.
“Credit scoring, while new to insurance rate making, should at the very least have to be substantiated by no less rigorous actuarial standards than other rate making criteria. The recent effort by insurers to hide behind the third-party provider of the data is unacceptable,” Holthaus wrote.
“Credit scoring is a ‘black box’ procedure that may deny otherwise acceptable insureds insurance coverage at rates that are appropriate to their risk rating factors. The formula is secret and the insured has little or no recourse to modify incorrect records.
The NAAA feels that credit scoring may even suggest a level of redlining that segments insureds into “haves and have-nots.”
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