Credit should in no way be involved with Insurance. The criteria used to make rates in the first place is duplicated in the scoring models. It is just a means to charge more for those who can’t afford it most. There is no convincing and this is absolutely true. Experience is the best teacher and credit has nothing to do with claims except a “correlation” to the experience.
I have in no way studied the correlation in home insurance but I have in auto. While there is a direct correlation to credit score and claims, there is also a direct correlation to credit score and zip code. Zip code and claims have already been linked. That’s the thing, you can do credit or zip code but doing both on an auto policy leads to discriminatory pricing plain and simple. Not sure why no one wants to talk about it.
Travelers is pre-imminent in zip code pricing. A customer can move 1 mile in the same city and if in a different zip code, get a premium change, usually higher. It is built into their goofy modeling scheme.
Zip codes are a proxy for other factors, and are being replaced by models using those factors in lieu of zip. But the inertia in the pricing systems supported by some regulators will take time to correct. Watch as zip code, 9 digit detail replaces zip codes, so that the premium differences will shrink from 9-dig-zip to another adjacent 9-dig-zip.
The credit score variable is a similar proxy variable for underlying variables that are reflected, imperfectly, in cr score. They too will fall by the wayside as GLM models are refined… in a year or two.
Slowly, GLMs and other actuarial pricing models are replacing credit score with more reliable, correlated variables that are encompassed in credit scores. In time, credit score will be phased out completely.
Completely agree. CA got rid of credit in Personal Lines over a decade ago. Carriers are still profitable in Homeowners. Now we need to stop Commercial carriers from using it. You are penalizing people who in many cases have a low score due to one or more of the three large credit agencies having erroneous information, which in no way should then be allowed to adversely affect their insurance accessibility or affordability. Good luck getting credit agencies to correct erroneous information they have.
It was so much easier for us agents to explain premium increases before the use of credit. It depends on why the customer’s credit score is low. I’ve noticed that many customers with low credit scores don’t keep their homes in good repair because they can’t afford to do so. However, I’ve also noticed that other customers have low credit scores but, only because they borrowed heavily to invest in improvements to their homes to make them better risks.
Credit should in no way be involved with Insurance. The criteria used to make rates in the first place is duplicated in the scoring models. It is just a means to charge more for those who can’t afford it most. There is no convincing and this is absolutely true. Experience is the best teacher and credit has nothing to do with claims except a “correlation” to the experience.
I have in no way studied the correlation in home insurance but I have in auto. While there is a direct correlation to credit score and claims, there is also a direct correlation to credit score and zip code. Zip code and claims have already been linked. That’s the thing, you can do credit or zip code but doing both on an auto policy leads to discriminatory pricing plain and simple. Not sure why no one wants to talk about it.
Travelers is pre-imminent in zip code pricing. A customer can move 1 mile in the same city and if in a different zip code, get a premium change, usually higher. It is built into their goofy modeling scheme.
Zip codes are a proxy for other factors, and are being replaced by models using those factors in lieu of zip. But the inertia in the pricing systems supported by some regulators will take time to correct. Watch as zip code, 9 digit detail replaces zip codes, so that the premium differences will shrink from 9-dig-zip to another adjacent 9-dig-zip.
The credit score variable is a similar proxy variable for underlying variables that are reflected, imperfectly, in cr score. They too will fall by the wayside as GLM models are refined… in a year or two.
Slowly, GLMs and other actuarial pricing models are replacing credit score with more reliable, correlated variables that are encompassed in credit scores. In time, credit score will be phased out completely.
Completely agree. CA got rid of credit in Personal Lines over a decade ago. Carriers are still profitable in Homeowners. Now we need to stop Commercial carriers from using it. You are penalizing people who in many cases have a low score due to one or more of the three large credit agencies having erroneous information, which in no way should then be allowed to adversely affect their insurance accessibility or affordability. Good luck getting credit agencies to correct erroneous information they have.
It was so much easier for us agents to explain premium increases before the use of credit. It depends on why the customer’s credit score is low. I’ve noticed that many customers with low credit scores don’t keep their homes in good repair because they can’t afford to do so. However, I’ve also noticed that other customers have low credit scores but, only because they borrowed heavily to invest in improvements to their homes to make them better risks.