The Ongoing Debate Over the Use of Credit Scores

January 8, 2012 AnMarie Bozick, CIC

The use of credit scores to determine a rate for insurance coverage has long been a controversial subject. Insurance shoppers question how their credit score could possibly play a role in whether or not they will file a claim while numerous insurers cite there is irrefutable statistical data to prove there is a direct correlation between an individual's credit score and the cost that insured will bear on the company in claims.

Below, we have provided links to studies and papers published on credit scoring. Having a full understanding of both sides of the issue can help agents to provide a better explanation to their insureds when asked why they need to pull their credit score.

Texas Department of Insurance
http://www.tdi.state.tx.us/reports/documents/creditall04.pdf
Released: December 2004
Findings: There appears to be a strong relationship between credit scores and claims experience on an aggregate basis. However, credit scores, to some extent, may be reflective of other risk characteristics associated with claims.

National Consumer Law Center
http://www.cej-online.org/cej%20report%20ins%20cr%20scoring%200501.pdf
Released: January 2005
Position: The problems with insurance scoring are so great that the practice should be prohibited.

Missouri Department of Insurance

http://insurance.mo.gov/reports/credscore.pdf
Released: January 2004
Findings: The evidence appears to be credible, substantial, and compelling that credit scores have a significant disproportionate impact on minorities and on the poor.

About the Author

AnMarie Bozick, CIC

AnMarie Bozick, CIC, manages ITC’s rating products, including TurboRater and TurboRater for Websites. She has more than 20 years of property and casualty insurance experience, including owning her own agency and serving as president of the Alliance of Insurance Agents of Texas. She joined ITC in 2008.

More Content by AnMarie Bozick, CIC
Previous Article
Restrict Access to TurboRater

If you have concerns about employees accessing TurboRater outside of your office, you can restrict access t...

Next Article
Introducing the Concept of Geomarketing

Explanation of geomarketing and how insurance rating software TurboRater can help agents better identify an...