The opponents of these “non-driving” factors are free to start their own insurance company, and not utilize any of these trivial factors. They will go broke, but it will be fun to watch.
If the position of the CFA were correct, then the sheer competitiveness of the auto insurance industry would financially eliminate any carrier from using the “other than driving factors”. I’m amazed the CFA cannot see the logic behind this (maybe they’re related to the morons at ACLU?)
Insurance rates are the result of the actuarial exposure to losses and not of some hypothectical, discriminatory decisions. What surveys like these don’t show is what the overall accident record of each of the criteria groups is. Each of those groups, or combinations of them, probably have higher accident ratios than the general population, so, as a group, their rates would naturally be higher. It’s easy to pin the discrimination label on treatment of various groupings, but that would imply insurance executives sit around and ponder how they can gouge certain groups of drivers. If that was the case, the rates would be so blatantly discriminatory that they’d never get past most state insurance departments, yet they obviously are being approved. Given the source of the survey, it wouldn’t surprise me that the survey was a pre-determined conclusion, or belief, in search of validation.
Accident ratios? No, we just consult the Magic 8-Ball (kidding).
Rusty, you are spot-on; rating factors are based on experience. Not only that, but many companies now take a multi-variate approach, where various attributes are contemplated simultaneously, thereby giving a more accurate picture. The goal is to charge the appropriate rate for each risk.
A lot is determined by how they ask the question. If it was ststed that “Stateistical evidence indicates that drvers who have the following non-driving charistics have more accidents than the average driver:
education
low occupation
lack of previous insurance
Since your insurane rate is determined by the average number of accidents per driver and since these drivers have a higer accident rate than you, would you prefer your insurance company raise your rate slightly to offset the increased accidents these drivers will have if we eliminate these discriminatory factors? that way we can give them the same rate as you although it will be higher than you are paying now?
It’s just that poison word “discrimination”. Sometimes people don’t realize it simply means differentiation.
Stats are stats, and where correlations exists – actuaries will set rates accordingly. You mean a High School Principal with a PhD living in the boonies is less risky than a high school drop out working at McDonalds living in downtown LA? No way!
It’s just another example of people wanting something for “free.” They see it as better to spread the cost to a broader set of drivers than to rate based on factors that are more specific to a particular driver. Mind you, most of these factors are within the control of the particular driver so, IMO, it’s OK. However, I don’t agree with using hereditary factors for health care rating because they are not within control of the individual. Stated another way, one set of factors are largely random(healthcare) while another set is not(auto).
If you want to accurately assess risk, isn’t it fair to consider all risk factors including heredity? Being out of one’s control doesn’t make it any less predictive. Why should costs be shifted to those who pose a lower risk?
The article may have more validity if we knew the weight that was attributed to these characteristics. I’m sure the greater emphasis is placed on accidents, tickets etc. but the other factors can help determine a valid rate.
Yes a high school dropout living in LA just may be a better risk than a high school principal with a phd. From what I’ve seen writing auto insurance in Florida (yay me!) for the last 10 years is that people with higher education, more money & fancy cars, tend to get ticket after ticket because they just don’t give a crap since they can afford the higher insurance rates. I feel that the high school dropout working at McDonald is a much better risk since he knows that just one ticket could make his insurance rates increase so much that he cannot afford to drive. Ted, don’t judge someone because they couldn’t afford to go to college or are working a minimum wage job.
There are always anomalies and stories to tell… but statistics are usually accurate. Your story above has no stats. So yes, there are some rich people who don’t care about claims, and just pay them, and there are very responsible poor people. That said, Education does heavily play into a person’s “insurance score.” But so too does claims experience. Remember, that an Insurance Score, is only one part of rating. A UW will also look at the type of car the person chose to buy and their driving record. An insurance score can become less or more important when reviewed as a part of a complete submission.
Insurance carriers use factors from statistics that, over time, validate themselves in bottom line results. I dont like the fact that my personal auto insurance premium is somewhat higher right now because my credit score went down for reasons that have nothing to do with my driving, BUT, statistically higher credit scores produce insureds that are better risks. One on one it is not valid but when working with tens of thousands, if not millions, it is.
I am one of those drivers that benefits from the predictive models, as I trust most of you reading this would be. I say to the actuaries: Keep up the good work – I like differentiation!
People have to realize that insurance is priced according to the risk of getting a claim, not getting into an accident. Two vastly different things.
So any predictive variable that has a statistically significant correlation to an insured filing a claim is considered.
Also, next thing you know, CFA will produce an opinion paper that advocates auto insurance companies cover pre-existing conditions (e.g. dings/dents etc. that occurred before the watch of the current insurer).
The opponents of these “non-driving” factors are free to start their own insurance company, and not utilize any of these trivial factors. They will go broke, but it will be fun to watch.
A “national” survey of 1,000 people? And this is supposed to have some merit?
If the position of the CFA were correct, then the sheer competitiveness of the auto insurance industry would financially eliminate any carrier from using the “other than driving factors”. I’m amazed the CFA cannot see the logic behind this (maybe they’re related to the morons at ACLU?)
Just so I understand, are you saying that if “other than driving factors” were not truly predictive, companies that use them would be unprofitable?
If so, I agree.
Insurance rates are the result of the actuarial exposure to losses and not of some hypothectical, discriminatory decisions. What surveys like these don’t show is what the overall accident record of each of the criteria groups is. Each of those groups, or combinations of them, probably have higher accident ratios than the general population, so, as a group, their rates would naturally be higher. It’s easy to pin the discrimination label on treatment of various groupings, but that would imply insurance executives sit around and ponder how they can gouge certain groups of drivers. If that was the case, the rates would be so blatantly discriminatory that they’d never get past most state insurance departments, yet they obviously are being approved. Given the source of the survey, it wouldn’t surprise me that the survey was a pre-determined conclusion, or belief, in search of validation.
Rusty, I do not know why some people have “disliked” your comment. Maybe you used too many BIG words! Anyway I hit the like button.
And people do not want to be confused by facts, just their feelings as to how things should be.
Accident ratios? No, we just consult the Magic 8-Ball (kidding).
Rusty, you are spot-on; rating factors are based on experience. Not only that, but many companies now take a multi-variate approach, where various attributes are contemplated simultaneously, thereby giving a more accurate picture. The goal is to charge the appropriate rate for each risk.
Perhaps the CFA would like to present some overwhelming statistics that support their position. Shouldn’t be too hard, feeling as the do!
A lot is determined by how they ask the question. If it was ststed that “Stateistical evidence indicates that drvers who have the following non-driving charistics have more accidents than the average driver:
education
low occupation
lack of previous insurance
Since your insurane rate is determined by the average number of accidents per driver and since these drivers have a higer accident rate than you, would you prefer your insurance company raise your rate slightly to offset the increased accidents these drivers will have if we eliminate these discriminatory factors? that way we can give them the same rate as you although it will be higher than you are paying now?
It’s just that poison word “discrimination”. Sometimes people don’t realize it simply means differentiation.
Stats are stats, and where correlations exists – actuaries will set rates accordingly. You mean a High School Principal with a PhD living in the boonies is less risky than a high school drop out working at McDonalds living in downtown LA? No way!
The real issue is how to predict and measure “prudent” driving (and parking) behavior. Right or wrong, these factors attempt to do this.
It’s just another example of people wanting something for “free.” They see it as better to spread the cost to a broader set of drivers than to rate based on factors that are more specific to a particular driver. Mind you, most of these factors are within the control of the particular driver so, IMO, it’s OK. However, I don’t agree with using hereditary factors for health care rating because they are not within control of the individual. Stated another way, one set of factors are largely random(healthcare) while another set is not(auto).
If you want to accurately assess risk, isn’t it fair to consider all risk factors including heredity? Being out of one’s control doesn’t make it any less predictive. Why should costs be shifted to those who pose a lower risk?
The article may have more validity if we knew the weight that was attributed to these characteristics. I’m sure the greater emphasis is placed on accidents, tickets etc. but the other factors can help determine a valid rate.
I guess there shoud be a discount for some college.
Then they can surcharge for dropped classes too.
College was expensive… Glad it pays off.
At the same time Facebook & Linkedin need to verify education reporting. All a sudden there wll be a lot of liers out there.
Whats Spicoli up to these days?
Yes a high school dropout living in LA just may be a better risk than a high school principal with a phd. From what I’ve seen writing auto insurance in Florida (yay me!) for the last 10 years is that people with higher education, more money & fancy cars, tend to get ticket after ticket because they just don’t give a crap since they can afford the higher insurance rates. I feel that the high school dropout working at McDonald is a much better risk since he knows that just one ticket could make his insurance rates increase so much that he cannot afford to drive. Ted, don’t judge someone because they couldn’t afford to go to college or are working a minimum wage job.
There are always anomalies and stories to tell… but statistics are usually accurate. Your story above has no stats. So yes, there are some rich people who don’t care about claims, and just pay them, and there are very responsible poor people. That said, Education does heavily play into a person’s “insurance score.” But so too does claims experience. Remember, that an Insurance Score, is only one part of rating. A UW will also look at the type of car the person chose to buy and their driving record. An insurance score can become less or more important when reviewed as a part of a complete submission.
Insurance carriers use factors from statistics that, over time, validate themselves in bottom line results. I dont like the fact that my personal auto insurance premium is somewhat higher right now because my credit score went down for reasons that have nothing to do with my driving, BUT, statistically higher credit scores produce insureds that are better risks. One on one it is not valid but when working with tens of thousands, if not millions, it is.
I am one of those drivers that benefits from the predictive models, as I trust most of you reading this would be. I say to the actuaries: Keep up the good work – I like differentiation!
People have to realize that insurance is priced according to the risk of getting a claim, not getting into an accident. Two vastly different things.
So any predictive variable that has a statistically significant correlation to an insured filing a claim is considered.
Also, next thing you know, CFA will produce an opinion paper that advocates auto insurance companies cover pre-existing conditions (e.g. dings/dents etc. that occurred before the watch of the current insurer).