Many insurance companies are using credit scores as a factor in their rating and underwriting processes. This has come under some scrutiny as of late, due to the current conditions of the economy. Many feel that due to economic hardship people’s credit scores may have suffered. And in light of the insurance companies using these scores as a factor in determining rates, customers will end up having to pay a great deal more than they would otherwise. A recent spring meeting between the Casualty Actuarial Society and the National Association of Insurance brought up this topic and discussed points raised by the American Academy of Actuaries in regards to the subject.
According to Insurance News Net, insurance companies that use credit scores as a factor in determining rates are on the rise. This process isn’t new, and for approximately 20 years consumer groups and regulators have questioned the reliability of the scores, the effectiveness of determining rates with them, and the impact it will have on the consumer.
Some people feel that the process cannot be exact, and that the formulas that make up credit scores are unknown and unpredictable, therefore limiting the fairness of their use by insurance companies. Others feel that the credit score may have negative connotations on other aspects of the consumer’s personal details such as their income or other demographic traits.
At the meeting, a senior director of Analytics for LexisNexis Insurance Solutions, expressed that in his view, the economy would have no negative affect on the data insurance companies collect for credit score based ratings. He explained that insurance models use a mixture of attributes to rank loss propensity, and that it is more than just a credit score — it assesses credit inquiries, payment behavior, derogatory public records and other factors. Risk analysts then use these factors to assess the likelihood that a file will be claimed.
Similar Posts:
- Over The Counter Bulletin Board – OTC – How To Evaluate A Consulting Firm
- Car Sales Increase in Texas for 2010
- Auto Insurance Satisfaction Down
- Ohio DOI Launches New Comparison Tool
- California Auto Insurance Quotes
