Comments on: On Oregon Measure 42 and Insurance Credit Soring In General http://www.triskele.com/2006/10/16/on-oregon-measure-42-and-insurance-credit-soring-in-general Political & actuarial musings and assorted roadgeek trivia Wed, 17 Mar 2010 14:41:37 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Shane McGuirt http://www.triskele.com/2006/10/16/on-oregon-measure-42-and-insurance-credit-soring-in-general/comment-page-1#comment-314 Shane McGuirt Thu, 09 Nov 2006 00:39:06 +0000 http://test.triskele.com/2006/10/16/on-oregon-measure-42-and-insurance-credit-soring-in-general/#comment-314 <p>There are only three reliable and fair indicators of a person's insurability in an automobile insurance context: 1. Driving record, 2. The number of years of driving experience 3. And the number of miles driven. Period! Twenty years ago, the California Department of Motor Vehicles did a study that discovered a connection between a person's driving record and hair color, Does that mean that hair color should be a determinant of insurability or an insurance rate? Of course not. You need to start with a thesis such as: 'Young men with testosterone tend to drive faster than the rest of us, so do they cause more accidents?' Then you look at the data. You don't start with data and say: 'Hey look, I found something. ' You need some intuitive logic first.'</p> <p>Consumer Reports Magazine performed an investigation to test the accuracy of insurance credit scoring, which insurance companies claim is amazingly precise. The magazine created a fictional person with a fixed history of bad credit and requested rate quotes from several of the larger insurance companies, Just how precise were the credit scoring models? The rate quotes for this one fictional person ranged from approximately $1,400 per year to $4,800 per year, all using the same credit history. What a rip-off. The scoring truly shows noting.</p> <p>The truth is, companies generally do not use your real credit score. They create their own "unique scoring model," which conveniently is a proprietary trade secret".</p> <p>Is there a real correlation between credit score and frequency of claims? Perhaps a slight one. But get this: the correlation is so slight that 96 percent of those with less than perfect credit have perfectly normal claim frequencies. In other words, 96 percent of those with weak credit are being punished for the behavior of a handful of bad apples, most of which could have been charged higher rates based on their driving records and past history of filing claims,, without ever looking at their credit score.</p> <p>I realize that some might object to more government regulation of business, which this is. To them, I would simply respond: When government requires citizens to buy a product, as is the case with insurance, the product is no longer truly a There are only three reliable and fair indicators of a person’s insurability in an automobile insurance context:
1. Driving record,
2. The number of years of driving experience
3. And the number of miles driven. Period!
Twenty years ago, the California Department of Motor Vehicles did a study that discovered a connection between a person’s driving record and hair color, Does that mean that hair color should be a determinant of insurability or an insurance rate? Of course not.
You need to start with a thesis such as: ‘Young men with testosterone tend to drive faster than the rest of us, so do they cause more accidents?’
Then you look at the data.
You don’t start with data and say: ‘Hey look, I found something.
‘ You need some intuitive logic first.’

Consumer Reports Magazine performed an investigation to test the accuracy of insurance credit scoring, which insurance companies claim is amazingly precise.
The magazine created a fictional person with a fixed history of bad credit and requested rate quotes from several of the larger insurance companies, Just how precise were the credit scoring models? The rate quotes for this one fictional person ranged from approximately $1,400 per year to $4,800 per year, all using the same credit history.
What a rip-off. The scoring truly shows noting.

The truth is, companies generally do not use your real credit score. They create their own “unique scoring model,” which conveniently is a proprietary trade secret”.

Is there a real correlation between credit score and frequency of claims? Perhaps a slight one. But get this: the correlation is so slight that 96 percent of those with less than perfect credit have perfectly normal claim frequencies. In other words, 96 percent of those with weak credit are being punished for the behavior of a handful of bad apples, most of which could have been charged higher rates based on their driving records and past history of filing claims,, without ever looking at their credit score.

I realize that some might object to more government regulation of business,
which this is.
To them, I would simply respond: When government requires citizens to buy a product, as is the case with insurance, the product is no longer truly a

]]> By: Kevin's Weblog http://www.triskele.com/2006/10/16/on-oregon-measure-42-and-insurance-credit-soring-in-general/comment-page-1#comment-313 Kevin's Weblog Tue, 07 Nov 2006 04:00:13 +0000 http://test.triskele.com/2006/10/16/on-oregon-measure-42-and-insurance-credit-soring-in-general/#comment-313 <p><strong>Measure 42 -- No...</strong></p> <p>I've also left the most complex of the state measures for last: Measure 42. (Or, at least, it seems like the most complex to me. Your opinion may vary.) This measure would ban the use of credit information in the pricing of any insurance prod...</p> Measure 42 — No…

I’ve also left the most complex of the state measures for last: Measure
42. (Or, at least, it seems like the most complex to me.
Your opinion may vary.) This measure would ban the use of credit
information in the pricing of any insurance prod…

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