here we go again, with the issue of use of credit. just because some of us have lower credit than another, only affects those whom what? trouble is that when we try to get things fixed correctly, why because we file a claim become a problem? risks!?!
when concerned with driving, credit and driving skills are completely differetn anitmals…like and apple and orange, yet both are fruits!…risks shud be based solely on the driving skills…now, if we keep looking at someone’s credit without their permission or even with their permission, that does not reflect correctly on their driving responsibility. even state troopers don’t know how to follow the laws of the road, so why should we?! whom is responsible then? my main issue, is we keep bring credit into the picture, when we have many folks whom violate the laws of the road including those that are to protect the laws of the road. we, all, need to drive the same. need to get to where you are going without breaking the law or endangering anyone. we need to be able to drive with distance between cars and not ride up on their bumper, because when you do leave holes, people try to play squeeze! again, let’s get back to that credit shows a person responsible for PAYING BILLS!!! you can have someone whom is a PHD and bad credit/bad driving and yet get good rates. yet, someone with a high school and good credit and driving and get mediocre rates. we try to play this game with numbers and not reality. so question: is the cup 1/2 empty or 1/2 full?
This may be the dumbest regulation applied to use of credit information for insurance purposes yet!
This translates roughly to “You are required to give your best risks a 30% rate increase when they renew, therefore ensuring that they switch to another carrier who can rate them using credit information.”
Get ready for your rates to go up, Alaskans, because everyone’s operating costs are about to go up to deal with the constant churn in the business!
Boloney! Once a carrier has underwritten a driver for a period of time, renewal can and should occur based on driving record and actual experience with the driver (ie. claims, vehicle type, other policies, etc.). Creditworthiness is a poor measure of risk but is a fair consideration when a driver is an unknown quantity.
OK, so one year of driving experience with a carrier is supposed to tell a carrier everything they are supposed to know? Personal Auto claim frequencies are very low, you would have to have a driver on the books for 20+ years before you would have any credible info about that driver.
Ratemaker has this nailed. This law basically gives good credit risks incentives to switch carriers at every renewal.
No individual driver is ever a “known quantity.” Credit history is an extremely strong predictor of losses. Insurers wouldn’t be using it if it didn’t work.
But that’s not the point of my comment – The Alaska regulation has created an unequal playing field. The simple fact is, most insurance consumers select their policy based on price. If I (as an insurer) am only allowed to give a credit-based discount in the first year I have that policy, how am I supposed to keep that policy for a second year when another insurer is allowed to give that policyholder a discount that I’m not?
you can still give same rates you just have to use the personal experience of the insured to write the renewal. If the person did not have a problem in the first year he also deserves the best rate. should an insured have a claim after one year you can up rate for the claim. Credit based rating is doubling up on insureds at renewal.
The level of ignorance that many on this website show about how credit scoring for insurance really works is astounding. I could maybe understand if it were the general public, but you would think that people in the industry would have a better grasp.
I second the Actuary’s comments…it astounds me that industry persons do not understand the interaction or correlation of credit information. The driving history is one thing, the credit information and scoring activities enhance and refine the pricing capability even further.
In deededee terms, true-claims and violations are predictive of future claim behavior…add in credit information and you refine that predictive power even more so.
Weren’t there a couple independent studies done in the past few years showing the correlation between credit scores and claims filed? The University of Texas sounds right. Of course, those who think that credit scores are improper will say any study disagreeing with their view will say the study is paid for by the evil insurance companies. If you know where these studies can be accessed please post a link.
There have been three government sponsored studies on credit scoring available to the public.
1) Texas Study
2) Federal Trade Commission
3) Federal Reserve (indirectly)
All three of these studies have supported the idea that credit scores improve predictive accuracy of future losses. This is in addition to countless private studies by industry that have arrived at the same conclusion.
Notice that above I said “improve” the prediction of losses and not “replace existing factors”. Items such as age,territory, violation points, and previous claims history still have a significant role, but adding credit to the equation has clearly been shown to improve predictive power. PERIOD.
1) credit does not reflect on driving. according to the studies, it apparently shows that someone has tendacy to file more claims. just because you file a claim does not mean your actually at fault. here’s the issue, it says file a claim because of credit – um – there are few states that disagree with the use of credit. if i have an um coverage or comp clm, neither are at-fault, and yet i filed a clm to get it fixed. because of this you want to give me a higher rate?! not fair! and this is the reason why that is a falsity of using credit score. i work in the industry, but do not agree. a driving record is more accurate than someone’s credit. i could live in a section 8 housing and have bad credit, but does that mean i have a bad risk? i could be an excellent driver and create no risk at all. credit score can not accurately prove that. it’s like saying a glass is half empty or half full. so credit is not a 100% accurate proof of bad driving or for that matter showing that i filed a claim more often. if i did file a claim for a not-at-fault clm, why shud that be held against me. if a company thinks that folks are filing false claims, then they can relook at the credit score. your not going to convince me that credit has anything with your driving ability. In one state, they don’t even use your occupation, but credit is a heavy score on determining risks. so what does that tell you?
here we go again, with the issue of use of credit. just because some of us have lower credit than another, only affects those whom what? trouble is that when we try to get things fixed correctly, why because we file a claim become a problem? risks!?!
when concerned with driving, credit and driving skills are completely differetn anitmals…like and apple and orange, yet both are fruits!…risks shud be based solely on the driving skills…now, if we keep looking at someone’s credit without their permission or even with their permission, that does not reflect correctly on their driving responsibility. even state troopers don’t know how to follow the laws of the road, so why should we?! whom is responsible then? my main issue, is we keep bring credit into the picture, when we have many folks whom violate the laws of the road including those that are to protect the laws of the road. we, all, need to drive the same. need to get to where you are going without breaking the law or endangering anyone. we need to be able to drive with distance between cars and not ride up on their bumper, because when you do leave holes, people try to play squeeze! again, let’s get back to that credit shows a person responsible for PAYING BILLS!!! you can have someone whom is a PHD and bad credit/bad driving and yet get good rates. yet, someone with a high school and good credit and driving and get mediocre rates. we try to play this game with numbers and not reality. so question: is the cup 1/2 empty or 1/2 full?
This may be the dumbest regulation applied to use of credit information for insurance purposes yet!
This translates roughly to “You are required to give your best risks a 30% rate increase when they renew, therefore ensuring that they switch to another carrier who can rate them using credit information.”
Get ready for your rates to go up, Alaskans, because everyone’s operating costs are about to go up to deal with the constant churn in the business!
Boloney! Once a carrier has underwritten a driver for a period of time, renewal can and should occur based on driving record and actual experience with the driver (ie. claims, vehicle type, other policies, etc.). Creditworthiness is a poor measure of risk but is a fair consideration when a driver is an unknown quantity.
OK, so one year of driving experience with a carrier is supposed to tell a carrier everything they are supposed to know? Personal Auto claim frequencies are very low, you would have to have a driver on the books for 20+ years before you would have any credible info about that driver.
Ratemaker has this nailed. This law basically gives good credit risks incentives to switch carriers at every renewal.
No individual driver is ever a “known quantity.” Credit history is an extremely strong predictor of losses. Insurers wouldn’t be using it if it didn’t work.
But that’s not the point of my comment – The Alaska regulation has created an unequal playing field. The simple fact is, most insurance consumers select their policy based on price. If I (as an insurer) am only allowed to give a credit-based discount in the first year I have that policy, how am I supposed to keep that policy for a second year when another insurer is allowed to give that policyholder a discount that I’m not?
you can still give same rates you just have to use the personal experience of the insured to write the renewal. If the person did not have a problem in the first year he also deserves the best rate. should an insured have a claim after one year you can up rate for the claim. Credit based rating is doubling up on insureds at renewal.
i know….if you have them for 6 months, and they are good drivers…why not have them keep the same rates….they did not cause any issues (paying claims)…
The level of ignorance that many on this website show about how credit scoring for insurance really works is astounding. I could maybe understand if it were the general public, but you would think that people in the industry would have a better grasp.
I second the Actuary’s comments…it astounds me that industry persons do not understand the interaction or correlation of credit information. The driving history is one thing, the credit information and scoring activities enhance and refine the pricing capability even further.
In deededee terms, true-claims and violations are predictive of future claim behavior…add in credit information and you refine that predictive power even more so.
Weren’t there a couple independent studies done in the past few years showing the correlation between credit scores and claims filed? The University of Texas sounds right. Of course, those who think that credit scores are improper will say any study disagreeing with their view will say the study is paid for by the evil insurance companies. If you know where these studies can be accessed please post a link.
There have been three government sponsored studies on credit scoring available to the public.
1) Texas Study
2) Federal Trade Commission
3) Federal Reserve (indirectly)
All three of these studies have supported the idea that credit scores improve predictive accuracy of future losses. This is in addition to countless private studies by industry that have arrived at the same conclusion.
Notice that above I said “improve” the prediction of losses and not “replace existing factors”. Items such as age,territory, violation points, and previous claims history still have a significant role, but adding credit to the equation has clearly been shown to improve predictive power. PERIOD.
Thank you
here’s the problem with the thinking:
1) credit does not reflect on driving. according to the studies, it apparently shows that someone has tendacy to file more claims. just because you file a claim does not mean your actually at fault. here’s the issue, it says file a claim because of credit – um – there are few states that disagree with the use of credit. if i have an um coverage or comp clm, neither are at-fault, and yet i filed a clm to get it fixed. because of this you want to give me a higher rate?! not fair! and this is the reason why that is a falsity of using credit score. i work in the industry, but do not agree. a driving record is more accurate than someone’s credit. i could live in a section 8 housing and have bad credit, but does that mean i have a bad risk? i could be an excellent driver and create no risk at all. credit score can not accurately prove that. it’s like saying a glass is half empty or half full. so credit is not a 100% accurate proof of bad driving or for that matter showing that i filed a claim more often. if i did file a claim for a not-at-fault clm, why shud that be held against me. if a company thinks that folks are filing false claims, then they can relook at the credit score. your not going to convince me that credit has anything with your driving ability. In one state, they don’t even use your occupation, but credit is a heavy score on determining risks. so what does that tell you?