Credit Scoring

9 Pages 2308 Words

es. These publications had articles stating the pros and cons of using “Credit Scoring” in underwriting and the problems associated with the practice. The newsletters from the Department of Insurance from states have articles about consumers complaining of high premium rates or increasing premium rates, when they have never had a claim and want someone to explain why this has occurred.

I chose this issue for two reasons, (1) I am a customer and I want the best coverage at the lowest price; (2) as a Compliance Analyst for an insurance company, I want our book of business to be solid with as few claims as possible. I also do not believe credit scoring should be the determining factoring premium rates.

Who is Effected?
Anyone who purchases insurance is effected. It is common knowledge that when insurance companies have a high loss rate over a period, insurance rates will increase to cover the loss. We all pay for the claims of others. The effect of using “Credit Scoring” as the only means for determining underwriting risk factors will put some consumers in such a high risk factor that their premium rate will be more than they can afford and they will not carry insurance. This will end up costing the people who have insurance more, because they will have to pay higher rates, to cover claims of the uninsured. If a person cause damage to some else’s property and does not have insurance, it is unlikely they will have the money to cover the loss, and suing them will be a waste of time and money. The long-term effect could be devastating; people who cannot afford insurance will loose their financing on their homes and vehicles. Finance companies demand insurance or they will finance property at higher mortgage rate.

The insurance agents are trying to increase their book of business by insuring customers who will not file a claim. On the other hand, the agents are making it difficult for people who depend on ins...