Dumbest Rule in Insurance...

[InsCommentary]

The 3rd paragraph then goes on to question the discriminatory nature of credit reports AND the final conclusion is that there are questions about the discriminatory nature. Not every conclusion on each of the issues indicated possible discrimination...I cited one that did.

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NY Disallows Education and Job Status in Auto Rating
http://www.propertycasualty360.com/...use-education-or-occupati?slreturn=1495140363

 

[VolAgent]

The 3rd paragraph then goes on to question the discriminatory nature of credit reports AND the final conclusion is that there are questions about the discriminatory nature. Not every conclusion on each of the issues indicated possible discrimination...I cited one that did.

I disagree.

There are also implications for fair lending. The data suggest that there may be economic incentives for lenders to charge blacks higher prices (or deny them at higher rates). Such actions are illegal under the nation’s fair lending laws. However, because such behavior may be economically profitable, it is important that fair lending laws be vigorously enforced to better ensure a level playing field. It is encouraging that in the data examined here there is relatively little evidence of interest rate and denial rate differences controlling for score. However, settlements and enforcement actions with lenders regarding alleged fair lending violations continue still occur suggesting that discriminatory behavior has not been eliminated.

To me this says that while there is behavior by lenders that violate fair lending laws and regulations, the data says that from a pure profit standpoint lenders should be even worse than they are. That while lenders still violate the law, they do respect it and ignore data that would encourage even more widespread disparity in rates and lending. Also, the authors lay the blame on financial literacy and education.

Now yes, I did not go looking for reports myself, I am merely analyzing the one you volunteered. However, nothing in it suggests that credit scores are discriminatory in and of themselves. If anything, many are receiving a credit score higher than their credit discipline would justify.

So far, we have anecdotal evidence from one agent (and I've actually heard this from countless others) and a study that really says credit scores are fairly accurate predictors of credit use.

Added:
As to the NY rules, again I have no problem with that. I have said all along and I will continue to say, I am for allowing factors that are real. Not anecdotal, but real. Is a bank teller more or less likely to get in an accident than a bookkeeper? Probably not. Is a plumber more likely than a doctor, probably but only because the plumber still makes house calls.

I listened to the Nationwide rep talk about their driving usage system, SmartRide. One of the things mentioned is that it monitors time of day, so nighttime driving. Is someone who works at night more likely to get into an accident or less?

 

[InsCommentary]

I personally haven't found many mistakes on my credit report. The problems were with the insurance score that incorporates this information. For example, the 3 "reason codes" I mentioned. When I brought this up in a seminar, I had two agents tell me they had seen the exact same 3 reason codes erroneously cited.

The biggest issue for me is the lack of transparency. If, as has happened twice to me, an inspection service says I don't have a hydrant within 1,000 feet of my house, that' easily fixed. The issue is understandable and correctable. The same thing applies for construction features, fire extinguishers and other rating factors.

With credit scoring, "big data," predictive modeling, and "black box" algorithms, transparency is almost completely gone. That does not bode well for an industry that is almost universally distrusted and reviled at a level barely above politicians. Last week, I got this email:

"Just got off the phone with one of our agents. He has an insured with three cars, but one only has Comp on it. The insured is looking for ways to cut his premiums, so he told our member to take the Comp coverage off the one car (he’s thinking about selling it anyway). When the agency did that, the premiums for the other two cars went up. When the member called the carrier, he was told, 'There are 70 factors that go into the auto premium. We can’t tell what caused this one to go up.'”

Another agent I discussed this with responded, "I run into this all the time, I had a carrier I found when you changed # of years the insured owned the car the rate went up if this question lead to showing the insured had bought the car used, premium was cheaper if # of years owned figured meant he bought car new. Some carriers have over 100 pricing points. In today's world you can’t just use the premiums you see on the dec page for deleting coverages anymore you have to go in and make a dummy change and see what the change actually does."

I talked to an actuary at a convention seminar on data analytics and his company is testing a model with 600 rating factors. To what end realistically?

Good discussion. Thanks.

 

[todd02]

Nope I disagree. Typically I see people with money file claims more frequently because they can afford the deductibles. The poorer low credit never file a claim because they can't afford too. Rich people have more expensive things, and due to better credit have lower premium. So they file more expensive claims. Pay less.

My credit score use to fluctuate big time from credit utilization.

 

[VolAgent]

Nope I disagree. Typically I see people with money file claims more frequently because they can afford the deductibles. The poorer low credit never file a claim because they can't afford too. Rich people have more expensive things, and due to better credit have lower premium. So they file more expensive claims. Pay less.

My credit score use to fluctuate big time from credit utilization.

Which is why I would prefer something more than an agent's opinion. Lots of agents say that poor credit is an indicator of future claims. Yet here you are saying the exact opposite.

 

[shawnmwalker]

Real Life:

I have a great credit score. I have a bunch of money in my bank. I have a fender bender. I fix it on my own dime for $1000.

I have bad credit. I have no money on money in the bank. I have a fender bender. I call my company to take care of it.


Repeat but change the line of insurance. Home, Boat, etc. etc.