FTC: Credit Scores are Predictive of Auto Ins.Claims

[Anonymous]

Uh oh.  Now the auto insurance industry can more officially justify using your FICO score to determine your eligibiity for coverage, the amount of your premium, etc.

So please 'splain me why if you have a few accounts in collections, you are more likely to get rear-ended by the jerk driving behind you??

http://www.ftc.gov/opa/2007/07/facta.shtm

[MidnightVoice]

---

masdeocho wrote:

Uh oh.  Now the auto insurance industry can more officially justify using your FICO score to determine your eligibiity for coverage, the amount of your premium, etc.

So please 'splain me why if you have a few accounts in collections, you are more likely to get rear-ended by the jerk driving behind you??

http://www.ftc.gov/opa/2007/07/facta.shtm

---

There was a paper out there somewhere disputing this correlation.

And it is statistics.  If the studies are right, then those with lower scores file more claims, it is a simple as that

[fused]

---

masdeocho wrote:

Uh oh.  Now the auto insurance industry can more officially justify using your FICO score to determine your eligibiity for coverage, the amount of your premium, etc.

So please 'splain me why if you have a few accounts in collections, you are more likely to get rear-ended by the jerk driving behind you??

http://www.ftc.gov/opa/2007/07/facta.shtm

---

Mas, I agree 100% with you. I'm one of the fortunate few. I live in Hawaii and our state passed legislation prohibiting insurance companies from pulling credit reports, soft or hard.

[Anonymous]

Same here in California...they can't do that.

I think linking insurance risk and credit scores is dubious. I would like to see hard, unbiased evidence of a correlation between bad credit and bad driving.

[Anonymous]

---

TheNewWorldMan wrote:
I would like to see hard, unbiased evidence of a correlation between bad credit and bad driving.

---

I daresay someone wealthy and presumably with good credit can pay to keep their driving record clean. As such, it's bound to skew things more than a bit.

[Anonymous]

---

@Anonymous wrote:

---

@Anonymous wrote:
I would like to see hard, unbiased evidence of a correlation between bad credit and bad driving.

---

I daresay someone wealthy and presumably with good credit can pay to keep their driving record clean. As such, it's bound to skew things more than a bit.

---

Ah, but then we get into unproven correlations between wealth and credit ratings. Wealth does not guarantee a good rating, nor poverty preclude one.

I would just like to see the data mined by an independent researcher posing the simple question: does an inverse relationship exist between FICO scores and accident rates? Is that relationship strong and pervasive? If the answer is yes, then I think insurance companies should be allowed to base rates on FICO scores. If not--and I suspect the results of an independent study would bear this out--the practice should be banned.

[Anonymous]

TheNewWorldMan wrote:

Ah, but then we get into unproven correlations between wealth and credit ratings. Wealth does not guarantee a good rating, nor poverty preclude one.

---

Doesn't require a guarantee. Merely a trend. FICO scoring isn't about guarantees. It's about likely risks and trending. There's no guarantee that someone in the 800s will never default.

If wealth could be shown to skew driving records, and I think it's likely, then it's a faulty indicator of risk.

[Anonymous]

Then there's gonna be the matter of race.

It also determined that, as a group, African-Americans and Hispanics tend to have lower scores than non-Hispanic whites and Asians. Therefore, the use of scores likely leads to African-Americans and Hispanics paying relatively more for automobile insurance than non-Hispanic whites and Asians.

TNWM, correct me if I'm wrong, but is not this something you and I have discussed before and agree there's a racial divide in FICO scores? Not in the scoring formula itself, but in the factors that contribute to scoring. The scoring formula is color blind, but the things which are scored and the circumstances that get one there most definitely are NOT color blind.

Message Edited by Noah_Bodie on 07-24-2007 09:00 PM