although, it was ruled in favor of the insurance company….what i have yet to figure out, is why is so important that we have to use credit to determine a risk for insurance…if someone has bad credit, yes, it not good to loan them money…but is not insurance based on driving?..it’s not based on if that vehicle is going to be fraudlent for a claim…although insurance companies like to use the law of large numbers, where does it end…we can always say that a cup is half full or half empty…i sometimes think we go to far thinking that folks are out for money…in many cases every company has an siu and each state as a fraud unit to catch those folks…insurance should be based 80% on driving…
The reason insurers want to be able to use credit history to rate/underwrite policies is because it works. We don’t necessarily know WHY it works, but it does work. On AVERAGE and with the effects of all traditional rating variables (including Age, gender, use of the vehicle, and driving history) accounted for, insureds with a low score file more claims and larger claims than those with an average or above average score.
The credit score used by your insurer is not the same one used by the bank when you apply for a loan. It is derived from the same data, but it is weighted differently and there are some data elements that the insurer is not permitted to use (income, for example.)
I personally don’t like having to use it for rating, but any company who doesn’t is going to get their butt kicked in the competetive market.
The other reason insurers want to hang on to credit is that they don’t want to be told what they can and cannot use for rating a policy. If we let the government get its foot in that door, it’s the first step down a very slippery slope.
I’m an agent. Explain this to my accounts… A young physician or dentist buys an office, purchases expensive medical equipment and has several credit cards. He or she makes over $300,000…
Or, a wealthy business person who builds nice multimillion dollar house, pays cash to build it then decides to go to a bank and replinish half his payout with a million dollar loan. This husband & Wife, each have an unlimited American Express card. Their income is nearly one million dollars per year from work and even more from investments. Because each of the above have high limit credit cards, have recently borrowed money and were diligent enough to check several lenders for the best rate, they suffer a high credit score. No consideration is given to their income and ability to pay
Are they worse risks than those who have the same score because they don’t pay their bills?
IM an Insurance Agent as well, and i feel that the Credit Scores should NOT reflect
multiple credit cards or high limit cards.
I think if we are talking credit worthyness, i think payment history should be the only criteria used. IF they pay ontime – good credit, if they dont then lesser credit.
I admit, I have a horrible credit history. I got into credit card trouble in college and it has taken me a long time to learn the responsibility that comes with it.
On the other hand, I’m a good driver, pay my premium on time all the time, never had to pay out for a claim, no accidents, no tickets, i don’t drive a ridiculously expensive car, nor is it a sports car, etc…
I admit, I would be frustrated if my insurance premium were based on my credit history because the two histories aren’t relative nor congruent with each other.
Plus, and I don’t even know how I feel about saying this, If people with lower incomes are using credit to aid in their monthly income, and you tack a big premium on them because they have bad credit due to that….odds are, they are going to drive around without any insurance at all.
As an agent – I DON’T care one way or the other. Maybe things are different in California since the passage of Prop 103, but I could care less about credit scores. If the carriers are using it and applying it fairly to everyone great. If no one is using, that’s fine too. As an independent agent I will use whatever company is the best fit for each prospect, so if company A is hurting themselves by using the score when no-one else is, that is their loss. Who cares?
And let’s not forget that we are paid commission on the premium. The higher the premium the higher the commission – of course market competition will keep the prices in check. A lot of noise about nothing (at least in California) Alan.
While I agree that credit scoring makes good underwriting, I must also say that Safeco pushes every envelope they possibly can. They will stick it to you on their commission statements in everyway possible. Safeco needs to get with the times or continue to lose their market share.
The Supreme Court sided with two insurance companies Monday in a case involving alleged violations of the Fair Credit Reporting Act. The law requires insurance companies and other businesses …
Back to article
When did the Supreme court help your $$$$$$$. If you have lots and lots money you can run over people, make the rules for we ????
That is a silly response. The Supreme court is here to enforce our laws, not to enforce things the way you personally like it. Both individuals and corporations have rights. While I take stab at Safeco for their practices, this doesn’t mean I will force them to stop, they can do it as mush as they want and I can choose not to do business with them. The marketplace is king. By the way, if you think there is some law that these companies have violated, please specifically state what law that is and what jurisdiction it is on the books in.
it’s not the matter that the geico won…they stood up for their right to use credit as an u/w criteria…not all agents are paid by commission either…
but whether that person might file a larger claim because of the credit does not mean that they are actually bad drivers…if they can use that as a signal for a claim instead of driving to ensure that they are only paying on a proper claim…
some folks have low credit but are very good responsible folks when it comes to driving….we try alot in the industry to relate everything to being more responsible…you could have someone whom is a college professor whom has a bad habit of speeding, whereas we can get a kid working at a fast food joint and no violations of driving…why – so we can say a professor is a better driver or the kid?…remember insurance is based on risk, sometimes we associate risk differently…
think about the days of lloyds of london, it was about the risk or captains taking their ships around the world and trading goods…remember, tho, ships we also subject to pirates and even the whether…
i think credit, is not a very credible at determining a risk for driving, but it should be used only as a signal for a unreasonable amount of claim paid out or frequency of filing claims for more pay…as far as driving, i never heard a credit score – earning a driver license, nor have i heard DMV saying you had to have a score level to get a license…
I’ve been an agent for over 28 years. I have had 3 customers convicted of arson (burning their own house down), 2 customers convicted of having their car stolen, 2 convicted of insurance fraud staging accidents and lots of suspicious claims in which fraud was suspected. In each and every one of these it was the insured’s bad credit score which alerted claims investigators to take a closer look. These customers’ credit had deteriorated to the point that they might do something illegal to use their insurance policy to make some money. This is one of the key factors in why insurance companies use credit.
My customers with the best credit usually better maintain their property- homes, autos, boats, etc..
It was so much simplier to write insurance before credit scoring but, it works. Most of my customers pay lower rates thanks to credit scoring.
I do think that credit scoring can be allowed only with adequate disclosure to the customer.
KU
I think that credit scoring has merit and works in many cases. However, I also agree with other responders that some people with high incomes and high credit limits are not being properly scored. Many people are able to use large amounts of credit very responsibly but, most insurance scoring does not reflect this fact. Late payments should the area of most concern when scoring credit – not ratios.
KU
although, it was ruled in favor of the insurance company….what i have yet to figure out, is why is so important that we have to use credit to determine a risk for insurance…if someone has bad credit, yes, it not good to loan them money…but is not insurance based on driving?..it’s not based on if that vehicle is going to be fraudlent for a claim…although insurance companies like to use the law of large numbers, where does it end…we can always say that a cup is half full or half empty…i sometimes think we go to far thinking that folks are out for money…in many cases every company has an siu and each state as a fraud unit to catch those folks…insurance should be based 80% on driving…
The reason insurers want to be able to use credit history to rate/underwrite policies is because it works. We don’t necessarily know WHY it works, but it does work. On AVERAGE and with the effects of all traditional rating variables (including Age, gender, use of the vehicle, and driving history) accounted for, insureds with a low score file more claims and larger claims than those with an average or above average score.
The credit score used by your insurer is not the same one used by the bank when you apply for a loan. It is derived from the same data, but it is weighted differently and there are some data elements that the insurer is not permitted to use (income, for example.)
I personally don’t like having to use it for rating, but any company who doesn’t is going to get their butt kicked in the competetive market.
The other reason insurers want to hang on to credit is that they don’t want to be told what they can and cannot use for rating a policy. If we let the government get its foot in that door, it’s the first step down a very slippery slope.
Credit also can reflect a person’s responsibility level and the more responsible the driver is the less likely they will cause an accident.
I’m an agent. Explain this to my accounts… A young physician or dentist buys an office, purchases expensive medical equipment and has several credit cards. He or she makes over $300,000…
Or, a wealthy business person who builds nice multimillion dollar house, pays cash to build it then decides to go to a bank and replinish half his payout with a million dollar loan. This husband & Wife, each have an unlimited American Express card. Their income is nearly one million dollars per year from work and even more from investments. Because each of the above have high limit credit cards, have recently borrowed money and were diligent enough to check several lenders for the best rate, they suffer a high credit score. No consideration is given to their income and ability to pay
Are they worse risks than those who have the same score because they don’t pay their bills?
IM an Insurance Agent as well, and i feel that the Credit Scores should NOT reflect
multiple credit cards or high limit cards.
I think if we are talking credit worthyness, i think payment history should be the only criteria used. IF they pay ontime – good credit, if they dont then lesser credit.
I admit, I have a horrible credit history. I got into credit card trouble in college and it has taken me a long time to learn the responsibility that comes with it.
On the other hand, I’m a good driver, pay my premium on time all the time, never had to pay out for a claim, no accidents, no tickets, i don’t drive a ridiculously expensive car, nor is it a sports car, etc…
I admit, I would be frustrated if my insurance premium were based on my credit history because the two histories aren’t relative nor congruent with each other.
Plus, and I don’t even know how I feel about saying this, If people with lower incomes are using credit to aid in their monthly income, and you tack a big premium on them because they have bad credit due to that….odds are, they are going to drive around without any insurance at all.
As an agent – I DON’T care one way or the other. Maybe things are different in California since the passage of Prop 103, but I could care less about credit scores. If the carriers are using it and applying it fairly to everyone great. If no one is using, that’s fine too. As an independent agent I will use whatever company is the best fit for each prospect, so if company A is hurting themselves by using the score when no-one else is, that is their loss. Who cares?
And let’s not forget that we are paid commission on the premium. The higher the premium the higher the commission – of course market competition will keep the prices in check. A lot of noise about nothing (at least in California) Alan.
hey love….GEICO’s there for you, love….it’s all about saving money….and love….we won this lawsuit & you lost!
While I agree that credit scoring makes good underwriting, I must also say that Safeco pushes every envelope they possibly can. They will stick it to you on their commission statements in everyway possible. Safeco needs to get with the times or continue to lose their market share.
The Supreme Court sided with two insurance companies Monday in a case involving alleged violations of the Fair Credit Reporting Act. The law requires insurance companies and other businesses …
Back to article
When did the Supreme court help your $$$$$$$. If you have lots and lots money you can run over people, make the rules for we ????
That is a silly response. The Supreme court is here to enforce our laws, not to enforce things the way you personally like it. Both individuals and corporations have rights. While I take stab at Safeco for their practices, this doesn’t mean I will force them to stop, they can do it as mush as they want and I can choose not to do business with them. The marketplace is king. By the way, if you think there is some law that these companies have violated, please specifically state what law that is and what jurisdiction it is on the books in.
it’s not the matter that the geico won…they stood up for their right to use credit as an u/w criteria…not all agents are paid by commission either…
but whether that person might file a larger claim because of the credit does not mean that they are actually bad drivers…if they can use that as a signal for a claim instead of driving to ensure that they are only paying on a proper claim…
some folks have low credit but are very good responsible folks when it comes to driving….we try alot in the industry to relate everything to being more responsible…you could have someone whom is a college professor whom has a bad habit of speeding, whereas we can get a kid working at a fast food joint and no violations of driving…why – so we can say a professor is a better driver or the kid?…remember insurance is based on risk, sometimes we associate risk differently…
think about the days of lloyds of london, it was about the risk or captains taking their ships around the world and trading goods…remember, tho, ships we also subject to pirates and even the whether…
i think credit, is not a very credible at determining a risk for driving, but it should be used only as a signal for a unreasonable amount of claim paid out or frequency of filing claims for more pay…as far as driving, i never heard a credit score – earning a driver license, nor have i heard DMV saying you had to have a score level to get a license…
I’ve been an agent for over 28 years. I have had 3 customers convicted of arson (burning their own house down), 2 customers convicted of having their car stolen, 2 convicted of insurance fraud staging accidents and lots of suspicious claims in which fraud was suspected. In each and every one of these it was the insured’s bad credit score which alerted claims investigators to take a closer look. These customers’ credit had deteriorated to the point that they might do something illegal to use their insurance policy to make some money. This is one of the key factors in why insurance companies use credit.
My customers with the best credit usually better maintain their property- homes, autos, boats, etc..
It was so much simplier to write insurance before credit scoring but, it works. Most of my customers pay lower rates thanks to credit scoring.
I do think that credit scoring can be allowed only with adequate disclosure to the customer.
KU
I think that credit scoring has merit and works in many cases. However, I also agree with other responders that some people with high incomes and high credit limits are not being properly scored. Many people are able to use large amounts of credit very responsibly but, most insurance scoring does not reflect this fact. Late payments should the area of most concern when scoring credit – not ratios.
KU