@Ghoshida wrote:
@xerostatus wrote:
It's always a good idea to shop around for car insurance. It's also good to re-negotiate your premium each time you're up for renewal, even if there was no increase.
But on the topic of using credit score/history to guage risk for car insurance, you have to remember/acknowledge that any "insurance" is nothing more than a financial product, like a loan or mortgage. That's why there is sometimes overlap between banking and insurance (i.e. USAA, State Farm, etc). The insurance company is ultimately making a financial/"lending" decision when it comes to assessing your (their) risk. So to me, it makes perfect sense that insurance company would utilize your credit history to make actuarial decisions.
Put another way, the insurance companies actuarial analysis isn't based on your perceived risk of "getting into an accident" (i.e. driving history, etc.); rather, they are trying to determine your "risk of loss/claim" as a whole (of which one part would be the consideration of previously mentioned "driving history"). A subtle, but important distinction. The former is related to a very small subsect of any given person's perceived risk on a very specific activity; the latter being a more broader category of risk, and probably much more complicated in its calculation/determination.
I am not in complete agreement to this.
Anyway, this is the research leading up to all the hoolabaloo. http://repositories.lib.utexas.edu/bitstream/handle/2152/14798/bbr-2003-credit-and-insurance-losses....
The subtle difference argument is valid; however, it is stretching the "immoral customer" argument far too long.
The argument is about fairness of using this metric. A job loss / accident / divorce could wreck havoc on one's credit; and that's the time for the auto insurer to increase premiums, even if the driving history is perfect? The insurer is doing this with a cynical view: "Oh well, this guy has no money, he must be now totalling his car and claiming money from us. We'll show him!" which you'd call anticipated risk of filing a claim.
On the real side of the story, (a) such a view is overrated; and more often than not the financial organizations will do many gazillion times more "immoral" things than that chap whose premium was just increased; and (b) mandatory insurance rules will then either make that guy few hundred dollars poorer during distress, or worse, he'll have to give up his car that he'd otherwise need then the most.
I'd love people to not rely on their cars, and in turn, on auto insurance companies. Sadly, this cannot happen (in near future) in the US given its transportation structures for a good chunk of the population.
Actually, I'm probably more so inclined to agree with you in the context which you proposed. I should've either prefaced or appended my earlier post with that I actually don't necessarily agree with the practice, per se, but I do see that it "makes sense," not on a moral or fairness standpoint, but purely in that "big data" kind of way. Stats/numbers don't lie, but it also sometimes makes it "unfair." And this probably speaks more volumes about the validity of using these imperfect algorithms (i.e. FICO) to determine the undeterminable (future behavior), than anything else. But that's another topic for another day.
(this was later today.)
