Credit Scoring Benefits

Much has been written about the pros and cons of using a policyholder’s credit history in the underwriting and rating process. While insurers have long held that how well individuals manage their financial affairs is a reliable predictor of insurance risk, others have criticized the use of credit information by auto and home insurers and in particular the impact on low-income and minority groups. Now a Federal Trade Commission (FTC) report has found that credit-based insurance scores are effective predictors of risk under auto policies, both in terms of the number of claims individuals file and the total cost of those claims. As a result, the use of scores is likely to make the price of insurance better match an individual’s risk of loss. On average, higher-risk individuals will pay higher premiums and lower-risk individuals will pay lower premiums, says the FTC. We couldn’t have said it any better. Check out further I.I.I. info on credit-based insurance scores online.  

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