Interesting. The statement that “According to the individuals surveyed, insurance fraud occurs because of peoples’ need for money” indicates there could be a correlaton between someone’s credit/financial stability and loss history. Of course using someone’s credit as an underwriting variable is still unfair. Because after all, insurance pricing and underwritng is all about fairness.
Character flaws and lack of personal integrity lead to fraudulent claims. We’ve all experienced some unacceptable level of service in our lives, but that doesn’t justify acting like a low life and reverting to stealing. Yes, stealing. That’s what inflating a claim for filing a bogus claim is. We need to stop caring about being “PC”. This is not a “victimless crime”. We all pay for this illegal activity.
It’s the insurance company’s fault. No one is responsible for their actions especially when big government will take care of me. So when the government insures your car will fraud stop because of fiar coverage, or will it be easier to bamboozle the bureaucrats?
There is clear correlation between income and credit. Higher income generally yields higher credit scores and I can show you studies upon studies that prove this.
Yet with this documented fact people earning less money filed less claims according to this study. Statistics are manipulated to give the desired result. As such we have “powerful predictors” such as credit.
@Mr Solvent
“I can show you studies upon studies that prove this.”
Pony up. Let’s see em.
Frankly, I have never seen a legit one.
Soooo, if you could kindly point me to some studies that show Credit Based Insurance Scores are higher for higher incomes I would appreciate it.
Sue, you claim you’ve never seen a legit one. What do you consider legit? Fair Isaac has tried to disprove this fact for years. The fact that income isn’t used in a credit score doesn’t mean that those with higher income don’t have higher scores. It’s like saying those who live in the inner-city don’t have a higher claims propensity. We’d like to believe it, but it’s poppycock.
I find it very interesting that you all blame the consumer for inflating claims. I personally have turned in a “real” claim a couple of years ago where the insurance company adjuster is the one who inflated the claim & the insurance company’s agent didn’t seem to care when I brought it to his attention. The adjuster had the estimate from the body shop who was going to repair the vehicles & still paid out a MUCH higher amount. Seems to me fraud is all around us.
Never fear Antoninus, as soon as Comrad Obama takes over the insurance industry too, there will be plenty of “consumer protections” to go along with less coverage at higher prices.
We didn’t “all blame the consumer”. The article was written from this perspective. I know that there are bad and dishonest adjusters out there but their motivation to pay more on a claim isn’t quite as clear or common as the consumer’s. This article probably explains why we’re seeing more PIP clims in a bad economy. Everyone from insureds, chiro’s, & pain clinics have their hand in the insurance cookie jar.
Insurors, as a matter of practice, underpay claims. If this isn’t insurance fraud, I don’t know what is. They make as much money by underreserving losses as invesment income in this crappy economy, so there’s even more incentive to underpaqy these claims.
Yes, the Patriot Act contained many treasures. Warrantless wiretapping, demanding telecom companies turn over call records without warrants, declaring people “enemy combatants” and holding them indefinitely without charge. IIRC, one librarian even went to prison for refusing to turn over book checkout records. It was like living in a sci-fi book from the 50’s. Not to mention Bush’s attitude toward executive power (there are three equal branches of government, but the executive branch is more equal than the other two).
There’s a reason Obama won by a landslide in 2008. Many of us will “never forget”. Unfortunately Obama and the Democrats have been a far bigger disappointment than expected (ie some disappointment was expected given the ridiculous hype surrounding that campaign).
The only answer is smaller government. Unfortunately none of the parties are offering that – smaller government is not in their nature.
The Patriot act followed by 4 years of clueless Democratic “leadership” in the House and Senate are why we need a sustainable 3rd party. Democrats are fine until they’re in power as are Republicans. When either party controls the House, Senate and Presidency we all lose.
@Mr Solvent
You said, “There is clear correlation between income and credit. Higher income generally yields higher credit scores and I can show you studies upon studies that prove this.
Yet with this documented fact people earning less money filed less claims according to this study. Statistics are manipulated to give the desired result. As such we have “powerful predictors” such as credit.”
First, you seem unable to back up your “documented facts.”
Words are also manipulated to “give the desired results.” Making broad sweeping statements/condemnations of things without proof is verbal manipulation.
I am still waiting to review your “studies”
Please let’s us all know where one can see them.
Since you know the majority of these “studies” are proprietary, you’re just playing a tool for the industry. That said, have a look at the State of Missouri’s report here:
@Mr Solvent
I knew you would pull out that 6 year old and widely discredited study.
See here for one of many negative critiques: http://www.ask-epic.com/Publications/A%20Critique.pdf
I know I will never change your mind, as you have decided CBIS are evil, discriminate unfairly or whatever.
However, that is just your opinion, and there are other opinions.
And you are correct that most of the data is locked up in proprietary rate plans.
Having had the experience of building several CBIS based P&C personal lines rate plans I will add my opinion based on first hand knowledge of the relationship of CBIS to loss costs. Rock solid. The first time I was able to see the data even I was shocked at the correlation.
No facts here, just my experience and opinion.
Sue
Working in this industry for years and years in addition using credit scoring in auto insurance as my thesis for my MBA, I’ve looked at a lot of these “studies.”
Again, there’s no doubting the correlation between credit, DTAC ratio, and claims. There is no doubt that credit scores and DTAC ratios vary wildly based on income, age, and even location. Location is already a predictor of future loss. So is age and driving record as well as previous claims.
Interesting link. Thanks. One study that Progessive conducted (I believe it was back in 1996/1997) showed that credit score had little variance by zip code however I am unsure how many zip codes were compared. Plus this study raised the ethnicity issues that Progressive’s may have missed or avoided. Still the fact remains, if poorer credit scores reflect higher losses, do we use the data or ignore it. It does seem that in states where credit is used, the few “non credit” carriers seem to have a pricing disadvantage.
Is the price of their toys.
Ever think that a wealthy person with two + cars, home, boat, ATV, motorcycle, second home would have more EXPOSURE and thereby more claims than a person with just a modest house and one older car? But it isn’t so, even then.
There is no easy answer. If you look at states that ignore credit like…dare I say…California, you don’t have that pricing disadvantage. Most carriers that I know of in FL that don’t use credit are the high risk carriers. Of course they’re going to have a pricing disadvantage already.
I’m not object to using credit as a guideline in the underwriting process. I AM object to using credit as more than 10 to 15% of the total premium. There’s no reason you should be able to quote customer X with Company A for $400 and Company B for $900 when customer Y is $900 with Company A and $600 with company B using the same variables in claims, age, and driving experience.
@Mr Solvent
You would limit the CBIS impact on auto or HO rate to 10 to 15% even if the claim cost spread from lowest score to highest was 400%?
It is that great in personal lines, both auto and HO, even after neutralizing all other rating factors.
So are you in favor of wealth redistribution from the lowest cost drivers/homeowners to the highest cost?
Sue
PS: NCOIL basically prohibits risk selection/underwriting based solely on credit.
No I don’t need more protection, just less goverment (aka regulation & taxes). As a NY agency owner, the federal, state and local goverment is doing it’s best to strangle agencies (small businesses), which are the engine of our economy. The results of which are self-evident. Hard work, integrity and customer loyalty = productivity. No need for gov’t to meddle in that equation, which has worked for Americans for 234 years.
Then why is it on a no hit the rate can more than double as opposed to a good credit client? Come on! You really are just a tool for the industry aren’t you?
A claim is a claim no matter who files it. Zip code, loss history, driving record (on auto), age…these are thing that should be used to determine rates.
The ONLY way to stop Ins Fraud is swift & sure punishment of the violator. Criminally with fines & community service.
Civilly by denial of the phony claim in it’s entirety and cancellation of the violators current policy. It works!!!!!
@Mr Solvent
Thanks for the question. Here are the typical numbers. If the median CBIS group has a claim index of 100, the worst CBIS will have a claim cost of about 200 (up to 300 in some extreme cases). From the same median the best score group will have a claim cost index of around 50. So, a “neutral” would be about twice as high as the best.
Thanks again for the question.
Sue
@mjpdustin
Good Grief for sure. My old buddies still in the business (I’m retired, thank god) actually think the current hatred of big business brought on by the health insurance carrier and big bank bashing and general “class warfare” is causing an increase in fraudulent claims and claim padding.
Think of all the rhetoric about how its OK to walk away from ones mortgage. What’s a little claim fraud in light of that kind of attitude.
Relative morality seems to be the popular theme. They blanked me so I’m going to blank them.
Not a happy time in the good old US right now.
“predictors” and “modeling” as they relate to this topic are irrelvant. The bottom line is that people are either honest and have integrity or they don’t. Credit scores, education, and wealth are secondary….usually what’t easier to deal with by those who don’t understand the business. With 40 years in claims management including 16 “on the street”, it’s been proven over and over again.
@Sue Smith
Surely you aren’t comparing the decision to strategically default on one’s underwater mortgage with the CRIME of insurance fraud. They are not the same thing. I wouldn’t expect any big business to continue supporting debt when the underlying assets are worth less than the debt. Why should individual consumers be held to any different standard?
You are correct, a no-hit is supposed to be rate neutral. Unfortunately the rates are manipulated to be high with credit “discounts” and “surcharges.” Mostly credit is weighted to “discounts” to mislead consumers into thinking they’re getting a better deal.
I’m not an actuary but I’ve been in this business long enough to see who files claims and who doesn’t. I’ve got a few clients who’ve filed bankruptcy who haven’t filed a claim in 20+ years. There’s no way you can convince me that the bankruptcy suddenly makes them a worse risk to insure. Now, if they suddenly got a DUI and a couple of comp claims we can start talking about a change in risk.
I suspect with so many people (I’m in Michigan) defaulting, literally in the 10’s of thousands, they’ll have to remodel the credit scoring or no one will ever get a loan again. I suspect most people in Michigan are not doing strategic defaults but in fact have lost their jobs and cannot make their payments and are forced to relocate.
@youngin: “wouldn’t expect any big business to continue supporting debt when the underlying assets are worth less than the debt. Why should individual consumers be held to any different standard?”
Great advice. I just cancelled my last car payment. It is worth ALOT less than last year, and i had 3 years of payments left. Wish I thought of that sooner thanks!
A Twisted view of the world- all selfish and a “pass the buck” mentality that is making America NOT GREAT.
Youngin must be 12 years ols, on his Dad’s computer.
So corporations are expected to make rational decisions but individuals are not? Are you saying that being rational makes me a liberal, or do you have other specific knowledge of my position on various social issues?
Once upon a time I was invited to the White House for a private dinner with the President.
I am a respected businessman, with a factory that produces memory chips for computers and portable electronics.
There was some talk that my industry was being scrutinized by the administration, but I paid it no mind. I live in a FREE country. There’s nothing that the government can do to me if I’ve broken no laws. My wealth was EARNED honestly, and an invitation to dinner with an American President is an honor.
I checked my coat, was greeted by the Chief of Staff, and joined the President in a yellow dining room.
We sat across from each other at a table draped in white linen. The Great Seal was embossed on the china. Uniformed staff served our dinner.
The meal was served, and I was startled when my waiter suddenly reached out, plucked a dinner roll off my plate and began nibbling it as he walked back to the kitchen..
“Sorry ’bout that,” said the President. “Andrew is very hungry.”
“I don’t appreciate…” I began, but as I looked into the calm brown eyes across from me, I felt immediately guilty and petty. It was just a dinner roll. “Of course,” I concluded, and reached for my glass.
Before I could, however, another waiter reached forward, took the glass away and swallowed the wine in a single gulp. “And his brother, Eric, is very thirsty,” said the President.
I didn’t say anything. The president is testing my compassion, I thought. I withheld my comments and decided to play along. I didn’t want to seem unkind.
My plate was whisked away before I had tasted a bite.
“Eric’s children are also quite hungry.”
With a lurch, I crashed to the floor. my chair had been pulled out from under me.
“And their grandmother can’t stand for long.”
I excused myself, smiling outwardly, but inside feeling like a fool. Obviously
I had been invited to the White House to be sport for some game. I reached
for my coat, only to find it had been taken. I turned back to the President.
“Their grandfather doesn’t like the cold.”
I wanted to shout,”that was my coat!” But again, I looked at the placid
smiling face of my host and decided I was being a poor sport. I spread my
hands helplessly and chuckled.
Then I felt my hip pocket and realized my wallet was gone. I excused myself
and walked to a phone on an elegant side table.
I learned shortly that my credit cards had been maxed out, my bank accounts
emptied, my retirement and equity portfolios had vanished and my wife had been thrown out of our home.
Apparently, the waiters and their families were moving in. The President hadn’t moved or spoken as I learned all this, but finally I lowered the phone and turned to face him.
He said, “Andrew’s whole family has made bad financial decisions. They haven’t planned for retirement and they need a home. They recently defaulted on a subprime mortgage. I told them they could have your home. They need it more than you do.”
My hands were shaking. I felt faint as I stumbled back to the table and collapsed on the floor.
The President cheerfully ate his steak and drank his wine.
“By the way,” he said, “I have just signed an Executive Order nationalizing your factories. I’m firing you as head of your business. I’ll be operating the firm now for the benefit of all mankind.
There’s a whole bunch of Erics and Andrews out there, and they can’t come to you for jobs, groveling like beggars… We need to spread YOUR wealth around…”
I looked up. The President drained the last drops of wine. As the table was cleared, he lit a cigarette and leaned back in his chair.
He stared at me. I clung to the edge of the table as if it were a ledge and I were a man hanging over an abyss.
I thought of the years behind me, of the life I had lived. The life I had earned with a lifetime of work, risk and struggle.
Why was I punished? How had I allowed it to be taken? What game had I played and lost? I looked across the table and noticed with some surprise that there was no game board between us.
What had I done wrong?
As if answering the unspoken thought, President Obama suddenly cocked his head, locked his empty eyes to mine, and bared a million teeth, chuckling wryly as he folded his hands.
The points made in the article are survey results, about what people FEEL is going on with fraud. There are very few actual facts or statistics to back up the claims that are being made. This is a waste.
Now THAT is the truth, whole truth, and nothing but the truth.
As a nation, we need to all PRAY that we cna get him out of there in 2012. As a nation, we need to UNITE, no matter what “party” you belong to, and do what is RIGHT for our country. If we don’t, we will ALL lose everything we have ever worked hard for and will leave this country in a place where our children and grandchildren and their children will be scared to live in.
It’s ok that people had HOPE for a CHANGE and therefore believed that he would be the one to change the world. We all make mistakes. Those people who voted him in are now realizing that he has not once stood for what he promised he would do. A lot of us knew he would not do our country any good but we are where we are and we have to now UNITE TOGETHER and make a CHANGE. LET’S GET AMERICA BACK TO WHERE IT USED TO BE!
Exactly which period in American history are we trying to get back to? Most of it seems like it was miserable, slavery and Jim Crow and workers being mistreated, the Great Depression and Dust Bowl and wartime rationing, Mcarthy-ism and the threat of nuclear annhiliation and spread of communism, stagflation . . .
sounds like maybe the 50’s and early 60’s were pretty cool if you were a white conservative. Is that the America you’re trying to get back to? All things considered, I’m pretty happy with the America we have now, except for all the hateful rhetoric from the extreme ends of the political spectrum.
I don’t know what the right wingnuts are smoking with this communist crap. Both Bush and Obama have largely ignored the middle class during the financial crisis. It was Bush who first took your dinner roll, but he gave it to a fat banker, not a poor worker. Obama was elected to stop the dinner roll thievery. He is not living up to the hype. I’m not sure what alternative you think we had though (McCain-Palin – it still makes me laugh).
Not saying McCain/Palin would’ve been perfect, but at least McCain has a lot more experience with this nation than Obama ever thought about. He has no experience other than feeding everyone a bunch of bull — he’s quite the salesman. Bush definitely wasn’t the greatest president, but tell me where the Bush tax cuts (which greatly benefit all of us in the middle class) aren’t what we need to keep? Obama trying to get rid of them will destroy ALL of us and get us all in deeper trouble. If you read the facts (and not listen to just the nightly news) you will see that if those cuts expire, WE WILL ALL SUFFER. See the difference in your tax return and tell me that Obama didn’t destroy us. I could care less about the 1% of americans that are wealthy. It’s not like they’re taxed at all. They’re still taxed more than we are. But without them WE WON’T HAVE JOBS TO FEED OUR FAMILIES. they’ll continue to go bankrupt and NONE of us will benefit. Most of the wealthy didn’t become wealthy overnight. Most worked their way up from nothing (Warren B). They were smart with their investments and with their money. So they deserve what they make. Good for them. Can we all be that way? Absolutely not. But I don’t care. Life isn’t all about money. It’s about taking care of our wives and children. DOING AWAY WITH THE BUSH TAX CUTS will not help the middle class!! WAKE UP and research it instead of just listening to the BS that Obama and his team feed us. READ THE FACTS. Or you can wait and see how you’ll end up paying taxes come tax time…or at least get thousands less than you did when the Bush TAx cuts were in place.
Youngin, you are spot on. Another Reader, how can you seriously say that President Obama Has ‘destroyed” our country. Now check the statistics and look at what has in FACT happened to the middle class in the past decade, with wage decreases and job loss…and increases in every facet of taxation (mostly under the Bush years) on the state and local levels…
You are WRONG, the Obama proposal is to keep all tax cuts of Bush for the middle class earning up to 250,000 year for a married couple; OVER 250,000 and ONLY over 250,000 is when the higher rates kick in for the increments earned over 250,000. GET YOUR FACTS STRAIGHT. And as for spending, where were you when Bush/Cheney started to bankrupt this country on the incursion into Iraq? Whatever his reasons, (maybe proving something to Daddy?…WMD being totally discredited) he surely didn’t recognize the real threat and enabled that threat to grow even greater…that’s IRAN, for those of you who don’t read and only listen to Glenn, Rush, and Fox.
You are always entitled to your opinions, this country being what it is, thankfully, but PLEASE GET YOUR FACTS STRAIGHT.
I cannot believe you may actually believe what you have written.
One fact, unemployment- is the telling factor in judging our economy (business confidence).
BHO is a ship without a rudder and Biden too. Can’t believe he drops the F-bomb on TV and is proud of it. None of them have any class or respect for our country and it’s taxpayers. Look at BHO’s appointees.
The World knows it too.
I see you didn’t bother to check out the stats on middle class wage loss. I see that you discount the fact that corps have been expoerting our white collar jobs overseas for a while now, and suffer no consequence for it taxwise.
You crab about unemployment, what about the corps sitting on trillions in profits that they are not investing back into the economy? Uncertainty, you say, is the reason? Yeah, right! This is payback to the administration for the Consumer Protection Bill and the Healthcare bill.
so be it. If I am drinking kool aid, your nostrils are FULL of sand.,
OF COURSE poor service leads to an increase in fraud. So does the current economy. So does the lack of faith in the current administration and corporate leadership (and I use that term very sarcastically) in general. But more than anything, it’s the apathy of the large carriers that do nothing to stop it. Instead of stepping up their SIU departments and increasing training – spending a little to save John Q. Publie a lot – they will just increase premiums to make up any shortfalls. They may have to cut back on some hiring/raises for their front line employees/advertising/building improvements/bribes to insurance commissioners and lobbyists, plus continue to work their dwindling under trained staffs to death – but hey – in the end – who ALWAYS pays for this crap. The honest ones. Certainly not the Executive Managements with their big separate bonus programs and corporate jets. Now that would be a travesty – any possibly get their attention. The guys in charge simply don’t give a crap about the folks really paying their bills. If they say otherwise, it’s smoke and mirrors and lip service 101. What is left of the middle class of our once great country has been outsourced. Maybe we should tear down that wall and head south. Or just away. Greed and corruption will be the downfall of our country. And it’s only just beginning.
One thing you fail to metion Cassandra is you bash Bush (debatable on the WMD which I am inclided to agree with you on) but during the “Bush Years”, the Democrats were the majority in congress since 2006. the President (Obama included) can’t do much on his own.
Also, Obama DOES have solicalist ideals (I like to think, socialist-lite). He was quoted, talking to Joe the Plumber (yea, you remember him, don’t you?) That he advicates that “the wealth be spread around”. You don’t have to take my word for it. It was caught on video. Now, I don’t fear socilism, but I feel that the capitalist system has the better system. It gives more insentive for people to work harder so they can aquire more. Other then “to benifit socity in general” thats really the only thing that keeps socilism going. How socity current is, people rarely care about the well-being of others. Now, Capitalism is not perfect. If it was, we would have cures for all sicknesses, there would be only wealth, not poverty for those who wants to work. Capitalism doesn’t address people that can not work, who are permently disabled.
The comments posted here illustrate he 2 types of people in the world. Those that carry the water, and those that drink the water. And for some of us… our backs are getting sore.
Someone mentioned PIP claims and it caused me to wonder how Obamacare will affect PIP coverage (and, for that matter, Workers Compensation). Anyone got an idea or seen any reference to that?
Interesting. The statement that “According to the individuals surveyed, insurance fraud occurs because of peoples’ need for money” indicates there could be a correlaton between someone’s credit/financial stability and loss history. Of course using someone’s credit as an underwriting variable is still unfair. Because after all, insurance pricing and underwritng is all about fairness.
Awwwwwwwwwwwwwwww, don’t throw COMMON SENSE into the equasion, Agent!
Character flaws and lack of personal integrity lead to fraudulent claims. We’ve all experienced some unacceptable level of service in our lives, but that doesn’t justify acting like a low life and reverting to stealing. Yes, stealing. That’s what inflating a claim for filing a bogus claim is. We need to stop caring about being “PC”. This is not a “victimless crime”. We all pay for this illegal activity.
It’s the insurance company’s fault. No one is responsible for their actions especially when big government will take care of me. So when the government insures your car will fraud stop because of fiar coverage, or will it be easier to bamboozle the bureaucrats?
What is needed is more consumer protection. After all consumers are always victims!
With this survey, no wonder Farmers has such a high loss ratio. It is time for new management in that company.
There is clear correlation between income and credit. Higher income generally yields higher credit scores and I can show you studies upon studies that prove this.
Yet with this documented fact people earning less money filed less claims according to this study. Statistics are manipulated to give the desired result. As such we have “powerful predictors” such as credit.
@Mr Solvent
“I can show you studies upon studies that prove this.”
Pony up. Let’s see em.
Frankly, I have never seen a legit one.
Soooo, if you could kindly point me to some studies that show Credit Based Insurance Scores are higher for higher incomes I would appreciate it.
Thanks.
Sue
Sue, you claim you’ve never seen a legit one. What do you consider legit? Fair Isaac has tried to disprove this fact for years. The fact that income isn’t used in a credit score doesn’t mean that those with higher income don’t have higher scores. It’s like saying those who live in the inner-city don’t have a higher claims propensity. We’d like to believe it, but it’s poppycock.
Sue- do you have a pit bull too?
I find it very interesting that you all blame the consumer for inflating claims. I personally have turned in a “real” claim a couple of years ago where the insurance company adjuster is the one who inflated the claim & the insurance company’s agent didn’t seem to care when I brought it to his attention. The adjuster had the estimate from the body shop who was going to repair the vehicles & still paid out a MUCH higher amount. Seems to me fraud is all around us.
Never fear Antoninus, as soon as Comrad Obama takes over the insurance industry too, there will be plenty of “consumer protections” to go along with less coverage at higher prices.
Vote to restore our Constitution in November!!!
Yeah. The Republicans had the utmost respect for our Constitution when they were in power.
Groan…………..Mr Vague aka “youngin'”. Are you referring to the Patriot Act? Could you be more specific??????
You probably are need of more consumer protection! Wish you the best protection around!
We didn’t “all blame the consumer”. The article was written from this perspective. I know that there are bad and dishonest adjusters out there but their motivation to pay more on a claim isn’t quite as clear or common as the consumer’s. This article probably explains why we’re seeing more PIP clims in a bad economy. Everyone from insureds, chiro’s, & pain clinics have their hand in the insurance cookie jar.
Insurors, as a matter of practice, underpay claims. If this isn’t insurance fraud, I don’t know what is. They make as much money by underreserving losses as invesment income in this crappy economy, so there’s even more incentive to underpaqy these claims.
I have a novel idea; How about everyone promoting JUSTICE instead of protection for one side or the other?
Yes, the Patriot Act contained many treasures. Warrantless wiretapping, demanding telecom companies turn over call records without warrants, declaring people “enemy combatants” and holding them indefinitely without charge. IIRC, one librarian even went to prison for refusing to turn over book checkout records. It was like living in a sci-fi book from the 50’s. Not to mention Bush’s attitude toward executive power (there are three equal branches of government, but the executive branch is more equal than the other two).
There’s a reason Obama won by a landslide in 2008. Many of us will “never forget”. Unfortunately Obama and the Democrats have been a far bigger disappointment than expected (ie some disappointment was expected given the ridiculous hype surrounding that campaign).
The only answer is smaller government. Unfortunately none of the parties are offering that – smaller government is not in their nature.
The Patriot act followed by 4 years of clueless Democratic “leadership” in the House and Senate are why we need a sustainable 3rd party. Democrats are fine until they’re in power as are Republicans. When either party controls the House, Senate and Presidency we all lose.
@Mr Solvent
You said, “There is clear correlation between income and credit. Higher income generally yields higher credit scores and I can show you studies upon studies that prove this.
Yet with this documented fact people earning less money filed less claims according to this study. Statistics are manipulated to give the desired result. As such we have “powerful predictors” such as credit.”
First, you seem unable to back up your “documented facts.”
Words are also manipulated to “give the desired results.” Making broad sweeping statements/condemnations of things without proof is verbal manipulation.
I am still waiting to review your “studies”
Please let’s us all know where one can see them.
Thanks.
Sue
Agreed
No pit bull. I hate dogs, but thanks for the compliment. ;-)
Sue,
Since you know the majority of these “studies” are proprietary, you’re just playing a tool for the industry. That said, have a look at the State of Missouri’s report here:
http://insurance.mo.gov/reports/credscore.pdf
It’s often the layperson’s understanding (or the lack thereof) of statistics that is manipulated.
“The average driver who switched to our company saved an average of $483”.
—-> Our company offers lower rates. Right?
“On average, women make $.78 for every dollar a man makes.”
—-> There must be $.22 of gender pay discrimination. Right?
@Mr Solvent
I knew you would pull out that 6 year old and widely discredited study.
See here for one of many negative critiques: http://www.ask-epic.com/Publications/A%20Critique.pdf
I know I will never change your mind, as you have decided CBIS are evil, discriminate unfairly or whatever.
However, that is just your opinion, and there are other opinions.
And you are correct that most of the data is locked up in proprietary rate plans.
Having had the experience of building several CBIS based P&C personal lines rate plans I will add my opinion based on first hand knowledge of the relationship of CBIS to loss costs. Rock solid. The first time I was able to see the data even I was shocked at the correlation.
No facts here, just my experience and opinion.
Sue
Working in this industry for years and years in addition using credit scoring in auto insurance as my thesis for my MBA, I’ve looked at a lot of these “studies.”
Again, there’s no doubting the correlation between credit, DTAC ratio, and claims. There is no doubt that credit scores and DTAC ratios vary wildly based on income, age, and even location. Location is already a predictor of future loss. So is age and driving record as well as previous claims.
Interesting link. Thanks. One study that Progessive conducted (I believe it was back in 1996/1997) showed that credit score had little variance by zip code however I am unsure how many zip codes were compared. Plus this study raised the ethnicity issues that Progressive’s may have missed or avoided. Still the fact remains, if poorer credit scores reflect higher losses, do we use the data or ignore it. It does seem that in states where credit is used, the few “non credit” carriers seem to have a pricing disadvantage.
Is the price of their toys.
Ever think that a wealthy person with two + cars, home, boat, ATV, motorcycle, second home would have more EXPOSURE and thereby more claims than a person with just a modest house and one older car? But it isn’t so, even then.
There is no easy answer. If you look at states that ignore credit like…dare I say…California, you don’t have that pricing disadvantage. Most carriers that I know of in FL that don’t use credit are the high risk carriers. Of course they’re going to have a pricing disadvantage already.
I’m not object to using credit as a guideline in the underwriting process. I AM object to using credit as more than 10 to 15% of the total premium. There’s no reason you should be able to quote customer X with Company A for $400 and Company B for $900 when customer Y is $900 with Company A and $600 with company B using the same variables in claims, age, and driving experience.
@Mr Solvent
You would limit the CBIS impact on auto or HO rate to 10 to 15% even if the claim cost spread from lowest score to highest was 400%?
It is that great in personal lines, both auto and HO, even after neutralizing all other rating factors.
So are you in favor of wealth redistribution from the lowest cost drivers/homeowners to the highest cost?
Sue
PS: NCOIL basically prohibits risk selection/underwriting based solely on credit.
No I don’t need more protection, just less goverment (aka regulation & taxes). As a NY agency owner, the federal, state and local goverment is doing it’s best to strangle agencies (small businesses), which are the engine of our economy. The results of which are self-evident. Hard work, integrity and customer loyalty = productivity. No need for gov’t to meddle in that equation, which has worked for Americans for 234 years.
Sue,
Then why is it on a no hit the rate can more than double as opposed to a good credit client? Come on! You really are just a tool for the industry aren’t you?
A claim is a claim no matter who files it. Zip code, loss history, driving record (on auto), age…these are thing that should be used to determine rates.
The ONLY way to stop Ins Fraud is swift & sure punishment of the violator. Criminally with fines & community service.
Civilly by denial of the phony claim in it’s entirety and cancellation of the violators current policy. It works!!!!!
I could be wrong but I thought in FL now the “no hit” was suppose to be “rate nuetral”.
@Mr Solvent
Thanks for the question. Here are the typical numbers. If the median CBIS group has a claim index of 100, the worst CBIS will have a claim cost of about 200 (up to 300 in some extreme cases). From the same median the best score group will have a claim cost index of around 50. So, a “neutral” would be about twice as high as the best.
Thanks again for the question.
Sue
So let me get this straight. Following consumer logic, if I get poor service from the waitress at the restaurant, it’s ok to steal the tablecloth?
Good grief.
@mjpdustin
Good Grief for sure. My old buddies still in the business (I’m retired, thank god) actually think the current hatred of big business brought on by the health insurance carrier and big bank bashing and general “class warfare” is causing an increase in fraudulent claims and claim padding.
Think of all the rhetoric about how its OK to walk away from ones mortgage. What’s a little claim fraud in light of that kind of attitude.
Relative morality seems to be the popular theme. They blanked me so I’m going to blank them.
Not a happy time in the good old US right now.
“predictors” and “modeling” as they relate to this topic are irrelvant. The bottom line is that people are either honest and have integrity or they don’t. Credit scores, education, and wealth are secondary….usually what’t easier to deal with by those who don’t understand the business. With 40 years in claims management including 16 “on the street”, it’s been proven over and over again.
@Sue Smith
Surely you aren’t comparing the decision to strategically default on one’s underwater mortgage with the CRIME of insurance fraud. They are not the same thing. I wouldn’t expect any big business to continue supporting debt when the underlying assets are worth less than the debt. Why should individual consumers be held to any different standard?
You are correct, a no-hit is supposed to be rate neutral. Unfortunately the rates are manipulated to be high with credit “discounts” and “surcharges.” Mostly credit is weighted to “discounts” to mislead consumers into thinking they’re getting a better deal.
I’m not an actuary but I’ve been in this business long enough to see who files claims and who doesn’t. I’ve got a few clients who’ve filed bankruptcy who haven’t filed a claim in 20+ years. There’s no way you can convince me that the bankruptcy suddenly makes them a worse risk to insure. Now, if they suddenly got a DUI and a couple of comp claims we can start talking about a change in risk.
I suspect with so many people (I’m in Michigan) defaulting, literally in the 10’s of thousands, they’ll have to remodel the credit scoring or no one will ever get a loan again. I suspect most people in Michigan are not doing strategic defaults but in fact have lost their jobs and cannot make their payments and are forced to relocate.
@youngin: “wouldn’t expect any big business to continue supporting debt when the underlying assets are worth less than the debt. Why should individual consumers be held to any different standard?”
Great advice. I just cancelled my last car payment. It is worth ALOT less than last year, and i had 3 years of payments left. Wish I thought of that sooner thanks!
A Twisted view of the world- all selfish and a “pass the buck” mentality that is making America NOT GREAT.
Youngin must be 12 years ols, on his Dad’s computer.
I’m sorry to hear about your personal financial misfortunes. Best of luck with the bankruptcy.
So corporations are expected to make rational decisions but individuals are not? Are you saying that being rational makes me a liberal, or do you have other specific knowledge of my position on various social issues?
The Dinner Roll …
Once upon a time I was invited to the White House for a private dinner with the President.
I am a respected businessman, with a factory that produces memory chips for computers and portable electronics.
There was some talk that my industry was being scrutinized by the administration, but I paid it no mind. I live in a FREE country. There’s nothing that the government can do to me if I’ve broken no laws. My wealth was EARNED honestly, and an invitation to dinner with an American President is an honor.
I checked my coat, was greeted by the Chief of Staff, and joined the President in a yellow dining room.
We sat across from each other at a table draped in white linen. The Great Seal was embossed on the china. Uniformed staff served our dinner.
The meal was served, and I was startled when my waiter suddenly reached out, plucked a dinner roll off my plate and began nibbling it as he walked back to the kitchen..
“Sorry ’bout that,” said the President. “Andrew is very hungry.”
“I don’t appreciate…” I began, but as I looked into the calm brown eyes across from me, I felt immediately guilty and petty. It was just a dinner roll. “Of course,” I concluded, and reached for my glass.
Before I could, however, another waiter reached forward, took the glass away and swallowed the wine in a single gulp. “And his brother, Eric, is very thirsty,” said the President.
I didn’t say anything. The president is testing my compassion, I thought. I withheld my comments and decided to play along. I didn’t want to seem unkind.
My plate was whisked away before I had tasted a bite.
“Eric’s children are also quite hungry.”
With a lurch, I crashed to the floor. my chair had been pulled out from under me.
“And their grandmother can’t stand for long.”
I excused myself, smiling outwardly, but inside feeling like a fool. Obviously
I had been invited to the White House to be sport for some game. I reached
for my coat, only to find it had been taken. I turned back to the President.
“Their grandfather doesn’t like the cold.”
I wanted to shout,”that was my coat!” But again, I looked at the placid
smiling face of my host and decided I was being a poor sport. I spread my
hands helplessly and chuckled.
Then I felt my hip pocket and realized my wallet was gone. I excused myself
and walked to a phone on an elegant side table.
I learned shortly that my credit cards had been maxed out, my bank accounts
emptied, my retirement and equity portfolios had vanished and my wife had been thrown out of our home.
Apparently, the waiters and their families were moving in. The President hadn’t moved or spoken as I learned all this, but finally I lowered the phone and turned to face him.
He said, “Andrew’s whole family has made bad financial decisions. They haven’t planned for retirement and they need a home. They recently defaulted on a subprime mortgage. I told them they could have your home. They need it more than you do.”
My hands were shaking. I felt faint as I stumbled back to the table and collapsed on the floor.
The President cheerfully ate his steak and drank his wine.
“By the way,” he said, “I have just signed an Executive Order nationalizing your factories. I’m firing you as head of your business. I’ll be operating the firm now for the benefit of all mankind.
There’s a whole bunch of Erics and Andrews out there, and they can’t come to you for jobs, groveling like beggars… We need to spread YOUR wealth around…”
I looked up. The President drained the last drops of wine. As the table was cleared, he lit a cigarette and leaned back in his chair.
He stared at me. I clung to the edge of the table as if it were a ledge and I were a man hanging over an abyss.
I thought of the years behind me, of the life I had lived. The life I had earned with a lifetime of work, risk and struggle.
Why was I punished? How had I allowed it to be taken? What game had I played and lost? I looked across the table and noticed with some surprise that there was no game board between us.
What had I done wrong?
As if answering the unspoken thought, President Obama suddenly cocked his head, locked his empty eyes to mine, and bared a million teeth, chuckling wryly as he folded his hands.
“You should have stopped me at the dinner roll.”
The points made in the article are survey results, about what people FEEL is going on with fraud. There are very few actual facts or statistics to back up the claims that are being made. This is a waste.
Here is one from the FTC in 2007:
article on it…
http://www.ftc.gov/opa/2007/07/facta.shtm
the actual report…
http://www.ftc.gov/os/2007/07/P044804FACTA_Report_Credit-Based_Insurance_Scores.pdf
Now THAT is the truth, whole truth, and nothing but the truth.
As a nation, we need to all PRAY that we cna get him out of there in 2012. As a nation, we need to UNITE, no matter what “party” you belong to, and do what is RIGHT for our country. If we don’t, we will ALL lose everything we have ever worked hard for and will leave this country in a place where our children and grandchildren and their children will be scared to live in.
It’s ok that people had HOPE for a CHANGE and therefore believed that he would be the one to change the world. We all make mistakes. Those people who voted him in are now realizing that he has not once stood for what he promised he would do. A lot of us knew he would not do our country any good but we are where we are and we have to now UNITE TOGETHER and make a CHANGE. LET’S GET AMERICA BACK TO WHERE IT USED TO BE!
Exactly which period in American history are we trying to get back to? Most of it seems like it was miserable, slavery and Jim Crow and workers being mistreated, the Great Depression and Dust Bowl and wartime rationing, Mcarthy-ism and the threat of nuclear annhiliation and spread of communism, stagflation . . .
sounds like maybe the 50’s and early 60’s were pretty cool if you were a white conservative. Is that the America you’re trying to get back to? All things considered, I’m pretty happy with the America we have now, except for all the hateful rhetoric from the extreme ends of the political spectrum.
I don’t know what the right wingnuts are smoking with this communist crap. Both Bush and Obama have largely ignored the middle class during the financial crisis. It was Bush who first took your dinner roll, but he gave it to a fat banker, not a poor worker. Obama was elected to stop the dinner roll thievery. He is not living up to the hype. I’m not sure what alternative you think we had though (McCain-Palin – it still makes me laugh).
Not saying McCain/Palin would’ve been perfect, but at least McCain has a lot more experience with this nation than Obama ever thought about. He has no experience other than feeding everyone a bunch of bull — he’s quite the salesman. Bush definitely wasn’t the greatest president, but tell me where the Bush tax cuts (which greatly benefit all of us in the middle class) aren’t what we need to keep? Obama trying to get rid of them will destroy ALL of us and get us all in deeper trouble. If you read the facts (and not listen to just the nightly news) you will see that if those cuts expire, WE WILL ALL SUFFER. See the difference in your tax return and tell me that Obama didn’t destroy us. I could care less about the 1% of americans that are wealthy. It’s not like they’re taxed at all. They’re still taxed more than we are. But without them WE WON’T HAVE JOBS TO FEED OUR FAMILIES. they’ll continue to go bankrupt and NONE of us will benefit. Most of the wealthy didn’t become wealthy overnight. Most worked their way up from nothing (Warren B). They were smart with their investments and with their money. So they deserve what they make. Good for them. Can we all be that way? Absolutely not. But I don’t care. Life isn’t all about money. It’s about taking care of our wives and children. DOING AWAY WITH THE BUSH TAX CUTS will not help the middle class!! WAKE UP and research it instead of just listening to the BS that Obama and his team feed us. READ THE FACTS. Or you can wait and see how you’ll end up paying taxes come tax time…or at least get thousands less than you did when the Bush TAx cuts were in place.
Youngin, you are spot on. Another Reader, how can you seriously say that President Obama Has ‘destroyed” our country. Now check the statistics and look at what has in FACT happened to the middle class in the past decade, with wage decreases and job loss…and increases in every facet of taxation (mostly under the Bush years) on the state and local levels…
You are WRONG, the Obama proposal is to keep all tax cuts of Bush for the middle class earning up to 250,000 year for a married couple; OVER 250,000 and ONLY over 250,000 is when the higher rates kick in for the increments earned over 250,000. GET YOUR FACTS STRAIGHT. And as for spending, where were you when Bush/Cheney started to bankrupt this country on the incursion into Iraq? Whatever his reasons, (maybe proving something to Daddy?…WMD being totally discredited) he surely didn’t recognize the real threat and enabled that threat to grow even greater…that’s IRAN, for those of you who don’t read and only listen to Glenn, Rush, and Fox.
You are always entitled to your opinions, this country being what it is, thankfully, but PLEASE GET YOUR FACTS STRAIGHT.
I cannot believe you may actually believe what you have written.
One fact, unemployment- is the telling factor in judging our economy (business confidence).
BHO is a ship without a rudder and Biden too. Can’t believe he drops the F-bomb on TV and is proud of it. None of them have any class or respect for our country and it’s taxpayers. Look at BHO’s appointees.
The World knows it too.
I see you didn’t bother to check out the stats on middle class wage loss. I see that you discount the fact that corps have been expoerting our white collar jobs overseas for a while now, and suffer no consequence for it taxwise.
You crab about unemployment, what about the corps sitting on trillions in profits that they are not investing back into the economy? Uncertainty, you say, is the reason? Yeah, right! This is payback to the administration for the Consumer Protection Bill and the Healthcare bill.
so be it. If I am drinking kool aid, your nostrils are FULL of sand.,
OF COURSE poor service leads to an increase in fraud. So does the current economy. So does the lack of faith in the current administration and corporate leadership (and I use that term very sarcastically) in general. But more than anything, it’s the apathy of the large carriers that do nothing to stop it. Instead of stepping up their SIU departments and increasing training – spending a little to save John Q. Publie a lot – they will just increase premiums to make up any shortfalls. They may have to cut back on some hiring/raises for their front line employees/advertising/building improvements/bribes to insurance commissioners and lobbyists, plus continue to work their dwindling under trained staffs to death – but hey – in the end – who ALWAYS pays for this crap. The honest ones. Certainly not the Executive Managements with their big separate bonus programs and corporate jets. Now that would be a travesty – any possibly get their attention. The guys in charge simply don’t give a crap about the folks really paying their bills. If they say otherwise, it’s smoke and mirrors and lip service 101. What is left of the middle class of our once great country has been outsourced. Maybe we should tear down that wall and head south. Or just away. Greed and corruption will be the downfall of our country. And it’s only just beginning.
One thing you fail to metion Cassandra is you bash Bush (debatable on the WMD which I am inclided to agree with you on) but during the “Bush Years”, the Democrats were the majority in congress since 2006. the President (Obama included) can’t do much on his own.
Also, Obama DOES have solicalist ideals (I like to think, socialist-lite). He was quoted, talking to Joe the Plumber (yea, you remember him, don’t you?) That he advicates that “the wealth be spread around”. You don’t have to take my word for it. It was caught on video. Now, I don’t fear socilism, but I feel that the capitalist system has the better system. It gives more insentive for people to work harder so they can aquire more. Other then “to benifit socity in general” thats really the only thing that keeps socilism going. How socity current is, people rarely care about the well-being of others. Now, Capitalism is not perfect. If it was, we would have cures for all sicknesses, there would be only wealth, not poverty for those who wants to work. Capitalism doesn’t address people that can not work, who are permently disabled.
The comments posted here illustrate he 2 types of people in the world. Those that carry the water, and those that drink the water. And for some of us… our backs are getting sore.
Someone mentioned PIP claims and it caused me to wonder how Obamacare will affect PIP coverage (and, for that matter, Workers Compensation). Anyone got an idea or seen any reference to that?