In the UK there is a clear correlation between credit score and accident frequency. Can’t imagine any UK insurer vowing to drop it, without adjusting all premiums upward to ensure no anti-selection. That would be a difficult marketing strategy in terms of maintaining market share, and likely lead to a portfolio of poorer quality risks.
People with higher credit scores, statistically have safer cars (they buy tires more frequently, and have their brakes replaced more often etc). They also tend to live and work in lower crime areas and are less likely to have their car stole or vandalized.
Not adjusting rates by credit score is just a stupid thing to do.
Because people with higher credit scores have safer cars and live and work in lower crime areas, you’ve already gave them lower rates because of 2 rating criteria. Using a third criteria that only reinforces the other two?
This press release is really just a publicity stunt by a really small player in the market.
One fault in the article is that it does not take into account that insurance credit scores do not include medical debt. The other short fall is that the survey does not tell its participants how much money they save for having excellent credit.
I just looked into my 2020 Best Rating Guide and view Root’s “Stellar Results” of 153% Combined Ratio; the best year to date! I guess they will make it up in volume.
If credit scoring works, why do the insurers bother with MVRs and clue reports? In fact, prior to the universal adoption of credit scoring, the carriers utilized a three year experience period. Now most go back five years. Since they’ve been using scoring for such a long time now, they can’t even use the “trust but verify” argument.
Credit Score is only one of a number of tools used for rating. It’s the combination of all of these tools that gets you to something better than a 153% loss ratio.
What an absurd argument. Not one insurer would ever advocate that a CIS is a replacement for other underwriting methodologies. CIS is an indicator of risk, likelihood to file a claim and ability to pay insurance premiums.
Credit scoring along with driving experience and other factors can be an accurate predictor of future losses. While credit scoring is a significant factors, other factors from the MVRs and clue reports among other information sources help bring an accurate prediction for the future.
State law in MA prevents insurance companies from considering credit scores as a rating factor for auto insurance. Credit scoring auto insurance (especially in Las Vegas NV – yes it’s a 24/7 town with higher exposure) can create a financial strain for those people who’s credit suffered due to a life event. With the current situation and mass layoffs, a lot of people can no longer afford to pay auto insurance and in some cases the cost exceeds their car payment I am one of those people who has been accident\claim free, had a safe car, and carried 250/500 limits, but could no longer afford to pay due. In MA my car insurance premium with 250/500 limits with 2017 vehicle was about $800 for a term, compared to Las Vegas $3,300. What a huge swing!
In the UK there is a clear correlation between credit score and accident frequency. Can’t imagine any UK insurer vowing to drop it, without adjusting all premiums upward to ensure no anti-selection. That would be a difficult marketing strategy in terms of maintaining market share, and likely lead to a portfolio of poorer quality risks.
Curious Brit: The exact same thing is true over here. This is a gimmick and will significantly hinder the underwriting process.
People with higher credit scores, statistically have safer cars (they buy tires more frequently, and have their brakes replaced more often etc). They also tend to live and work in lower crime areas and are less likely to have their car stole or vandalized.
Not adjusting rates by credit score is just a stupid thing to do.
Because people with higher credit scores have safer cars and live and work in lower crime areas, you’ve already gave them lower rates because of 2 rating criteria. Using a third criteria that only reinforces the other two?
People with higher credit scores turn in less claims, there’s that.
C’mon, Jack. Get with the virtue signaling! Everyone knows credit scoring is secret code for racism. In fact, everything is secret code for racism.
This press release is really just a publicity stunt by a really small player in the market.
One fault in the article is that it does not take into account that insurance credit scores do not include medical debt. The other short fall is that the survey does not tell its participants how much money they save for having excellent credit.
I just looked into my 2020 Best Rating Guide and view Root’s “Stellar Results” of 153% Combined Ratio; the best year to date! I guess they will make it up in volume.
With a combined ration of 153%, they may not be in business in 5 years.
Hidden due to low comment rating. Click here to see.
Credit Score is only one of a number of tools used for rating. It’s the combination of all of these tools that gets you to something better than a 153% loss ratio.
What an absurd argument. Not one insurer would ever advocate that a CIS is a replacement for other underwriting methodologies. CIS is an indicator of risk, likelihood to file a claim and ability to pay insurance premiums.
Credit scoring along with driving experience and other factors can be an accurate predictor of future losses. While credit scoring is a significant factors, other factors from the MVRs and clue reports among other information sources help bring an accurate prediction for the future.
State law in MA prevents insurance companies from considering credit scores as a rating factor for auto insurance. Credit scoring auto insurance (especially in Las Vegas NV – yes it’s a 24/7 town with higher exposure) can create a financial strain for those people who’s credit suffered due to a life event. With the current situation and mass layoffs, a lot of people can no longer afford to pay auto insurance and in some cases the cost exceeds their car payment I am one of those people who has been accident\claim free, had a safe car, and carried 250/500 limits, but could no longer afford to pay due. In MA my car insurance premium with 250/500 limits with 2017 vehicle was about $800 for a term, compared to Las Vegas $3,300. What a huge swing!