Before I stop posting, just one more..... Radon tests. In New York, every real estate closing for a home/dwelling has to have a radon test done. If radon gas is such a horrible pervasive killer, how come "radon deaths" has NEVER made the health section headlines or the front page news ? I mean NEVER!
So why do prospective home owners have to have a $350 Radon test done on their dream house ? So some greedy bas***d can get rich ? Or because it is the #___ (insert favorite number) killer in America ? Hmmmmm! Let's look at the things in America that kill people. Hmmmm! Where's radon deaths ? Does it even make the list ? Is it above death by snakebite ? No. So snake bites kill more than radon each year YET no snake inspections required are there? Hmmmm! They obviously haven't figured that one out yet. So if I held the patents/copyrights/trademarks, etc on the radon test, car alarms, snake inspection, and insurance credit scoring, I would be one very, very wealthy bas***d. Keep bent over America, I love ya! Later folks......
Insurance Credit Scoring Assitance
Moderators: Josh, independent guy
Brandy,
Nobody has ever said that having a bad insurance credit score causes claims. It's not like some poor fellow is drving down the road and thinking about all of his financial problems and is so distracted that he wraps his car around a telephone pole.
To give a more relevant example, think about this. It's a proven fact that red cars are wrecked more often. Does that mean that red cars are less controlable and threfor more likely to end up in a ditch? No. It means that for some unexplainable reason the type of person that is drawn to buy a red car is not as good of a driver on average as a person that is comfortable with buying a beige or silver car. It's not the fact that it's red that increases the liklihood of an accident.
The same is true for insurance scores. For some reason people that make poor financial decisions are more likely to have insurance claims. It's not the bad credit that causes claims. It's the fact that a person that spends their money in an unwise manner also happens to have a higher loss ratio on average.
Look at it any way you want, but if you don't take the time to do some research and evaluate the numbers then your response is emotional rather than rational. I suggest you take a look at the well publicized TX or FL studies and see their numbers. Keep in mind that these lawmakers were looking to outlaw it by finding that it didn't work and they were unable to do so. Even the CA study showed that it worked, they just wanted to make the constituants happy by banning it anyway.
Whether you like it or not, it's here to stay.
Nobody has ever said that having a bad insurance credit score causes claims. It's not like some poor fellow is drving down the road and thinking about all of his financial problems and is so distracted that he wraps his car around a telephone pole.
To give a more relevant example, think about this. It's a proven fact that red cars are wrecked more often. Does that mean that red cars are less controlable and threfor more likely to end up in a ditch? No. It means that for some unexplainable reason the type of person that is drawn to buy a red car is not as good of a driver on average as a person that is comfortable with buying a beige or silver car. It's not the fact that it's red that increases the liklihood of an accident.
The same is true for insurance scores. For some reason people that make poor financial decisions are more likely to have insurance claims. It's not the bad credit that causes claims. It's the fact that a person that spends their money in an unwise manner also happens to have a higher loss ratio on average.
Look at it any way you want, but if you don't take the time to do some research and evaluate the numbers then your response is emotional rather than rational. I suggest you take a look at the well publicized TX or FL studies and see their numbers. Keep in mind that these lawmakers were looking to outlaw it by finding that it didn't work and they were unable to do so. Even the CA study showed that it worked, they just wanted to make the constituants happy by banning it anyway.
Whether you like it or not, it's here to stay.
Brandy,
I'm with you on credit scoring. I was working for a fairly large non standard company when the idea was in it's infancy and I will share with you the reasons the CEO (who used to work for Progressive) wanted it implemented. Bottom line - People with good credit pay their bills. That's it. They don't lapse every month for non payment or pay late and cause the company money processing paperwork, sending late notices or reinstatements. Credit scoring only came into play since the CEO's and top management have come from the financial world. If you go back 20 years the top management of insurance companies came from Underwriting, marketing or claims - now they come with MBA's - have you never wondered why we now have CFO's??? Just another position to give to their accounting buddies.
As to the profitablity numbers they use to "prove" their case, keep in mind that people with bad credit tend to be younger or minorities or undereducated. These people generally live paycheck to paycheck. They drive older cars, work as waitresses, laborers, etc that the prefered companies have always declined (underwriting requirements). The companies wanted to be able to write more business at higher rates - so they adopted credit scoring which has allowed them to charge higher premiums or more aptly discriminate - legally - just the same way lenders have been doing for decades. Got bad credit - you now pay 24% for that car loan. They keep justifying it because that segment of the population has always been higher risk therefore the claims are more numerous.
Here's my favorite credit scoring test -
78 year old widowed female, 3 year old mini van, no longer a homeowner, 3 at fault accidents in 2 1/2 years.
45 year old divorced female, no children in household, 10 year old average vehicle, homeowner (packaged with auto), no tickets no accidents over 5 years.
Both are in same zip code. Both quoted with same company.
With credit scoring - guess who got the lower rate?
As an old underwriter - it makes me crazy to see accounts that you know will have claims get lower rates because they get put into better tiers.
I'm with you on credit scoring. I was working for a fairly large non standard company when the idea was in it's infancy and I will share with you the reasons the CEO (who used to work for Progressive) wanted it implemented. Bottom line - People with good credit pay their bills. That's it. They don't lapse every month for non payment or pay late and cause the company money processing paperwork, sending late notices or reinstatements. Credit scoring only came into play since the CEO's and top management have come from the financial world. If you go back 20 years the top management of insurance companies came from Underwriting, marketing or claims - now they come with MBA's - have you never wondered why we now have CFO's??? Just another position to give to their accounting buddies.
As to the profitablity numbers they use to "prove" their case, keep in mind that people with bad credit tend to be younger or minorities or undereducated. These people generally live paycheck to paycheck. They drive older cars, work as waitresses, laborers, etc that the prefered companies have always declined (underwriting requirements). The companies wanted to be able to write more business at higher rates - so they adopted credit scoring which has allowed them to charge higher premiums or more aptly discriminate - legally - just the same way lenders have been doing for decades. Got bad credit - you now pay 24% for that car loan. They keep justifying it because that segment of the population has always been higher risk therefore the claims are more numerous.
Here's my favorite credit scoring test -
78 year old widowed female, 3 year old mini van, no longer a homeowner, 3 at fault accidents in 2 1/2 years.
45 year old divorced female, no children in household, 10 year old average vehicle, homeowner (packaged with auto), no tickets no accidents over 5 years.
Both are in same zip code. Both quoted with same company.
With credit scoring - guess who got the lower rate?
As an old underwriter - it makes me crazy to see accounts that you know will have claims get lower rates because they get put into better tiers.
-
Insurance Monkey
- Insurance Journal Fan
- Posts: 6
- Joined: Wed May 24, 2006 1:50 pm
- Location: Missouri
Some of you (sanddog1, cathea, brandy) do not yet get that an insurance score is different that a credit score. It is amazing how little you know about something that affects your business so much. I would suggest that you take up an interest and reseach what an insurance score actually is. You might just learn something and become more helpful to your clients in the process.
I took up an interest and with a little research found a tool that helps my clients get better rates and allows me to write more business.
I took up an interest and with a little research found a tool that helps my clients get better rates and allows me to write more business.
Cathiea,
How can you go on and on about how insurance credit scores are bogus and unfair and then say the following in the same paragraph?
"They keep justifying it because that segment of the population has always been higher risk therefore the claims are more numerous. "
If you believe that, and I assume that you do because you wrote it, then how can you possibly say that an insurance score doesn't work and isn't a good predictor of risk?
Oh, and Sanddog1.... There are 2 'Ms' in spammer.
How can you go on and on about how insurance credit scores are bogus and unfair and then say the following in the same paragraph?
"They keep justifying it because that segment of the population has always been higher risk therefore the claims are more numerous. "
If you believe that, and I assume that you do because you wrote it, then how can you possibly say that an insurance score doesn't work and isn't a good predictor of risk?
Oh, and Sanddog1.... There are 2 'Ms' in spammer.
-
TCB61
- Insurance Journal Fan
- Posts: 6
- Joined: Thu Jan 26, 2006 11:25 am
- Location: West lafayette IN
- Contact:
darnovak,
I have always hated credit score "underwriting", but I dont think I have ever had all my objections compiled as clearly as you have stated.
Bravo! It is just voodoo! In my experience, the more "well heeled" the client the more likely you will have frequency of claims problems, not the opposite, as credit scoring would suggest.
Thanks!
TCB
I have always hated credit score "underwriting", but I dont think I have ever had all my objections compiled as clearly as you have stated.
Bravo! It is just voodoo! In my experience, the more "well heeled" the client the more likely you will have frequency of claims problems, not the opposite, as credit scoring would suggest.
Thanks!
TCB
FDBYME,
I disagree with credit scoring for the simple fact that not all the people who have bad or rough credit fall into the high risk segment of the population. There are many reasons for someone's credit to be reduced - just purchased a home or refinanced, temporary loss of job, etc. We've all seen it - the person who needs that homeowner policy for closing and they can't get it because their credit score is reduced because of their new debt to income ratio. Using credit scoring as a basis for acceptance and rate unfairly descriminates against those people who have perfect driving records and less than perfect credit. Ask any person who has gone thru downsizing of a major corp only to have to take a much lower paying job. Are these people worse drivers than they were when they were making big money and able to pay their bills on time?
The two examples I gave were real people written by the same company. The older woman with claims was placed in the ultra prefered tier and the younger one with no claims was placed in the non standard tier. Rates were significantly higher for the clean driver who prior to credit scoring would have been viewed as the ultra prefered risk in any prefered company. If credit scoring was used as a qualifier for payment plans, I would not object to it - in fact when it was first being tossed around that was it's purpose.
Oh and Insurance Monkey, in Arizona they do use your credit score as the primary basis for rate and acceptability. The only exception is medical bills. Every company has their own model adding in other factors such as payment history on utility bills. Do you mail your utility bills so that they're received by the due date?
I disagree with credit scoring for the simple fact that not all the people who have bad or rough credit fall into the high risk segment of the population. There are many reasons for someone's credit to be reduced - just purchased a home or refinanced, temporary loss of job, etc. We've all seen it - the person who needs that homeowner policy for closing and they can't get it because their credit score is reduced because of their new debt to income ratio. Using credit scoring as a basis for acceptance and rate unfairly descriminates against those people who have perfect driving records and less than perfect credit. Ask any person who has gone thru downsizing of a major corp only to have to take a much lower paying job. Are these people worse drivers than they were when they were making big money and able to pay their bills on time?
The two examples I gave were real people written by the same company. The older woman with claims was placed in the ultra prefered tier and the younger one with no claims was placed in the non standard tier. Rates were significantly higher for the clean driver who prior to credit scoring would have been viewed as the ultra prefered risk in any prefered company. If credit scoring was used as a qualifier for payment plans, I would not object to it - in fact when it was first being tossed around that was it's purpose.
Oh and Insurance Monkey, in Arizona they do use your credit score as the primary basis for rate and acceptability. The only exception is medical bills. Every company has their own model adding in other factors such as payment history on utility bills. Do you mail your utility bills so that they're received by the due date?
Cathiea,
Once again you are showing your complete ignorance in the subject. Allow me to educate you (which I can do since I'm an agent that deals with this sort of stuff and before I was an agent I was a credit analyst for a major insurance company).
1) Debt to income ratio is not used in either insurance scoring or traditional credit scoring. Nowhere on a credit report does it list what a person's income is. Therefor it's not possible to calculate a debt to income ratio from a credit report (insurance or otherwise).
2) People that are chronically ill, lost a job, suffered the loss of a spouse, were recently divorced or pretty much any other bad thing that can happen to a person are protected by the Fair Credit Reporting Act. Under that legislation the person in question can send in proof of their situation and their insurance company is required by law to overlook the negative information found in their credit report.
3) Utility bills are not lines of credit and therefor do not appear on a credit report. Only in cases where they are turned over to a collection company will they appear and even then they don't alway show up.
4) Nobody ever said that every single person that has a low score is a worse driver than every single person that has a high score. All that can be said is that the group of people that have low scores have a higher loss ratio than a group of people that have high scores. If you are wanting to make the argument that it isn't fair to use it because it's not always true then you should also expand your argument to say that it's not fair that men pay higher premiums than women because not every single man is a worse driver. The same can also be said for young drivers. Not every single young driver is a bad driver but the group as a whole is far more likely to have a claim than a group of older people.
I'm not coming down on you for fun. I don't take pleasure in picking apart your arguments. However, if you are going to be posting arguments like this in an insurance forum I think that it would be wise to learn a few things about insurance first.
Once again you are showing your complete ignorance in the subject. Allow me to educate you (which I can do since I'm an agent that deals with this sort of stuff and before I was an agent I was a credit analyst for a major insurance company).
1) Debt to income ratio is not used in either insurance scoring or traditional credit scoring. Nowhere on a credit report does it list what a person's income is. Therefor it's not possible to calculate a debt to income ratio from a credit report (insurance or otherwise).
2) People that are chronically ill, lost a job, suffered the loss of a spouse, were recently divorced or pretty much any other bad thing that can happen to a person are protected by the Fair Credit Reporting Act. Under that legislation the person in question can send in proof of their situation and their insurance company is required by law to overlook the negative information found in their credit report.
3) Utility bills are not lines of credit and therefor do not appear on a credit report. Only in cases where they are turned over to a collection company will they appear and even then they don't alway show up.
4) Nobody ever said that every single person that has a low score is a worse driver than every single person that has a high score. All that can be said is that the group of people that have low scores have a higher loss ratio than a group of people that have high scores. If you are wanting to make the argument that it isn't fair to use it because it's not always true then you should also expand your argument to say that it's not fair that men pay higher premiums than women because not every single man is a worse driver. The same can also be said for young drivers. Not every single young driver is a bad driver but the group as a whole is far more likely to have a claim than a group of older people.
I'm not coming down on you for fun. I don't take pleasure in picking apart your arguments. However, if you are going to be posting arguments like this in an insurance forum I think that it would be wise to learn a few things about insurance first.
-
darnovak
- Insurance Journal Addict
- Posts: 106
- Joined: Fri Jul 15, 2005 10:51 am
- Location: Alyamont NY USA
"Credit Scoring" validity inquiry
What entity (or entities) conducted the "credit score" research ? Was a group of 15,000 or 20,000 insurance policy holders tracked for 10, 15, or 20 years, the data compiled, and then the findings made public ? Was the research scrutinized and examined for accuracy ? Please name names and tell me where I can examine this research. If the "research" was not done in such a scientific manner, it cannot be reliable. When was it published ? (if ever)
I am willing to reconsider my position on "credit scoring" being used as a P&C underwriting tool when I can examine competent analysis of the research.
To date, I know of no source for obtaining the research done and no source for validation of such research. Please enlighten me! Thank you. Until such time I maintain credit scoring is nothing but illegal redlining and a gouging of the insurance buying public. It has no place in determining "loss potential" of any risk. Were the formulas for any carrier's scoring revealed, this would further the truth of the matter. As I recall, no carrier has yet revealed this secret. Perhaps they have a valid reason. Care to comment on this reason ? Please do so as I am curious about this matter also. Thank you.
I am willing to reconsider my position on "credit scoring" being used as a P&C underwriting tool when I can examine competent analysis of the research.
To date, I know of no source for obtaining the research done and no source for validation of such research. Please enlighten me! Thank you. Until such time I maintain credit scoring is nothing but illegal redlining and a gouging of the insurance buying public. It has no place in determining "loss potential" of any risk. Were the formulas for any carrier's scoring revealed, this would further the truth of the matter. As I recall, no carrier has yet revealed this secret. Perhaps they have a valid reason. Care to comment on this reason ? Please do so as I am curious about this matter also. Thank you.
fdbyrne
Oh boy I love it when people generalize...red cars have poor drivers give me a break. I will agree that red cars do seem to attract more accidents but I can not agree with you that they are caused by the drivers of the vehicle.
Case in point: My husband 50 years old purchased a GMC Sierra last April, his toy, his congrats the kids are raised and out of the house toy with everything you could get included, purchased with $10,000 in Boat Show upgrades and it's his baby. It's also the first vehicle he's ever had that isn't Black, it's Fire Truck Red. After making the second payment a commercial produce truck following to closely rear ended it and did $1,400 in PD, got the truck fixed and only 4 months later it was again rear ended while sitting in dead stop traffic on the 91 Freeway just outside of Riverside CA this time $800 in PD (not to bad actually), last month while following him home "I" almost rear ended him again. After pondering if the truck had "bad carma" I realized as I slammed on the brakes that his clear rear tail lights that light up red blend in with the color of the truck.
Now, my husband who you would label as being "not as good a driver as someone who would buy a silver or beige car" had up to this point NEVER been in a car accident in his life. So, how can you say the color of the car you drive determines your capabilities, that's like saying your intelligence level is determined by the color of your skin.
I totally disagree with you on the credit scoreing. There are to many factors that can cause a poor credit score above and beyond poor spending habits. What about those who are injured at work and lose all or part of their income. Oh sure Workers comp is gonna kick in and pay the medical bills but not the everyday bills, at least not until the claim is closed and paid out, then how many get paid fairly or have to hire a lawyer to get anything at all to compensate them for their lost wages. There's catastrophic illness, the poor guy who has a heart attack but isn't lucky enough to die so the life insurance doesn't pay out or the wife who is sticken with breast cancer and has to leave her job for 6 months of kimo and the family loses a third to half their income.
Our credit scores do not fairly depicked our reliablity when it comes to insurance, buying a house yes but paying a $50 to $150 a month ins premium, come on! It's just one more way for the insurance industry to bang the policy holder.
As for your web site that explains the difference between insurance score and credit score....the scoreing is the same, read their explanation it's in print. So, having read your site and since you're so sure you know more then the rest of us why don't you just enlighten us all about how you are able to clear up the insurance score and write more business. Go ahead, spell it out to all of us who are so undereducated about our business.
Sandog I know he's a spammer and a moron but people like this just need to be slapped, ya know what I mean?
Oh boy I love it when people generalize...red cars have poor drivers give me a break. I will agree that red cars do seem to attract more accidents but I can not agree with you that they are caused by the drivers of the vehicle.
Case in point: My husband 50 years old purchased a GMC Sierra last April, his toy, his congrats the kids are raised and out of the house toy with everything you could get included, purchased with $10,000 in Boat Show upgrades and it's his baby. It's also the first vehicle he's ever had that isn't Black, it's Fire Truck Red. After making the second payment a commercial produce truck following to closely rear ended it and did $1,400 in PD, got the truck fixed and only 4 months later it was again rear ended while sitting in dead stop traffic on the 91 Freeway just outside of Riverside CA this time $800 in PD (not to bad actually), last month while following him home "I" almost rear ended him again. After pondering if the truck had "bad carma" I realized as I slammed on the brakes that his clear rear tail lights that light up red blend in with the color of the truck.
Now, my husband who you would label as being "not as good a driver as someone who would buy a silver or beige car" had up to this point NEVER been in a car accident in his life. So, how can you say the color of the car you drive determines your capabilities, that's like saying your intelligence level is determined by the color of your skin.
I totally disagree with you on the credit scoreing. There are to many factors that can cause a poor credit score above and beyond poor spending habits. What about those who are injured at work and lose all or part of their income. Oh sure Workers comp is gonna kick in and pay the medical bills but not the everyday bills, at least not until the claim is closed and paid out, then how many get paid fairly or have to hire a lawyer to get anything at all to compensate them for their lost wages. There's catastrophic illness, the poor guy who has a heart attack but isn't lucky enough to die so the life insurance doesn't pay out or the wife who is sticken with breast cancer and has to leave her job for 6 months of kimo and the family loses a third to half their income.
Our credit scores do not fairly depicked our reliablity when it comes to insurance, buying a house yes but paying a $50 to $150 a month ins premium, come on! It's just one more way for the insurance industry to bang the policy holder.
As for your web site that explains the difference between insurance score and credit score....the scoreing is the same, read their explanation it's in print. So, having read your site and since you're so sure you know more then the rest of us why don't you just enlighten us all about how you are able to clear up the insurance score and write more business. Go ahead, spell it out to all of us who are so undereducated about our business.
Sandog I know he's a spammer and a moron but people like this just need to be slapped, ya know what I mean?
-
Michael Dhem
- Insurance Journal Fan
- Posts: 2
- Joined: Wed May 31, 2006 10:32 pm
Brandy,
Read back over this thread. I did not post the link to any site. I've not endorsed any site. If asking the person that did makes me a spammer, then sure, I'm a spammer. I do plan on trying the site out because it is possible for an insurance score to be improved. If you know what goes into the score (types of accounts, current balances, the number of accounts, etc.) you can manipulate your score. When I was a credit analyst that's what I did. I advised people what they needed to do to improve their score. It is possible to do some things to improve your score with very good results. Of course you can't get rid of late payments, bankruptcies, etc. But you can alter your credit report in a way that makes you score better.
When I was a credit analyst the phone calls that I hated the most were from agents like you. You are so closed minded. You've probably been against the whole idea from the day that you first heard about it and have never done any research to determine for yourself whether or not it works. If you were making any logical arguments or referring to any factual data I would think much more highly of you and your opinion even if I still disagreed.
Darnovak, I really like the fact that you are at least willing to look at the data. You may not change your mind after reading it but at least you are willing to take the time to think it through. Because you are willing, I went out and spent quite some time gathering some if the info that you wanted to take a look at.
This one is the most detailed study that I've ever found on the subject. The sample was 170,000 policies and it actually gives the loss ratios for each credit factor.
http://www.casact.org/pubs/forum/00wforum/00wf079.pdf
Here are both a summary and the whole study for the now famous TX study. Keep in mind that the point of this study was to disprove that the process works.
http://www.iii.org/media/hottopics/addi ... itscoring/
http://www.ic2.org/publications/bbr_creditstudy.pdf
Here is an independent study done by the III which is about as trustworthy of a group as any.
http://server.iii.org/yy_obj_data/binar ... Credit.pdf
Read back over this thread. I did not post the link to any site. I've not endorsed any site. If asking the person that did makes me a spammer, then sure, I'm a spammer. I do plan on trying the site out because it is possible for an insurance score to be improved. If you know what goes into the score (types of accounts, current balances, the number of accounts, etc.) you can manipulate your score. When I was a credit analyst that's what I did. I advised people what they needed to do to improve their score. It is possible to do some things to improve your score with very good results. Of course you can't get rid of late payments, bankruptcies, etc. But you can alter your credit report in a way that makes you score better.
When I was a credit analyst the phone calls that I hated the most were from agents like you. You are so closed minded. You've probably been against the whole idea from the day that you first heard about it and have never done any research to determine for yourself whether or not it works. If you were making any logical arguments or referring to any factual data I would think much more highly of you and your opinion even if I still disagreed.
Darnovak, I really like the fact that you are at least willing to look at the data. You may not change your mind after reading it but at least you are willing to take the time to think it through. Because you are willing, I went out and spent quite some time gathering some if the info that you wanted to take a look at.
This one is the most detailed study that I've ever found on the subject. The sample was 170,000 policies and it actually gives the loss ratios for each credit factor.
http://www.casact.org/pubs/forum/00wforum/00wf079.pdf
Here are both a summary and the whole study for the now famous TX study. Keep in mind that the point of this study was to disprove that the process works.
http://www.iii.org/media/hottopics/addi ... itscoring/
http://www.ic2.org/publications/bbr_creditstudy.pdf
Here is an independent study done by the III which is about as trustworthy of a group as any.
http://server.iii.org/yy_obj_data/binar ... Credit.pdf
fdbyrne,
I'm closed minded, no it's you who is closed minded. After all it wasn't me who generalized an entire group of people by the color of the car they drive.
I as most level headed logical minded people out there understand you can manipulate your credit score and how to do it. That isn't the point, the point is whether or not it should be allowed to affect your insurance rating/premium. Funny how you completely overlooked everything that has been said by everyone about life circumstances and just keep plugging away at how great credit scoring is.
We all know credit scoring works. But, to who's advantage, it's not the policy holder but the insurance company. Don't you get it !
As for what you think of me I could care less. Personally I'm sure your just another one of those Americans who keeps voting our rights out from underneath us.
I'm closed minded, no it's you who is closed minded. After all it wasn't me who generalized an entire group of people by the color of the car they drive.
I as most level headed logical minded people out there understand you can manipulate your credit score and how to do it. That isn't the point, the point is whether or not it should be allowed to affect your insurance rating/premium. Funny how you completely overlooked everything that has been said by everyone about life circumstances and just keep plugging away at how great credit scoring is.
We all know credit scoring works. But, to who's advantage, it's not the policy holder but the insurance company. Don't you get it !
As for what you think of me I could care less. Personally I'm sure your just another one of those Americans who keeps voting our rights out from underneath us.