Oh yea…explained very well from the view of an insurance company. Totally worthless argument.
Well, they are the ones using it so I guess they should know why it’s useful to them!
If you spent more than 10 seconds typing your dismissal of the post to actually reading it, you’d see they have studies they referenced showing the correlation. But that would defeat your obvious ignorance and bias on the topic…
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I consulted to the insurance industry for over 10 years. They skew their studies to ensure they can justify to regulators higher rates. They are masters at it. I’m very very skeptical of any study from insurance companies, especially if it has anything to do with rates.
I would personally rather do business with people who pay their bills on time, and I’d offer them a discount to get their business. What’s so wrong about that?
Offering the same preferential treatment to people who don’t pay their bills on time, or don’t have a proven history of paying their bills on time, seems rather unwise to me due to the risk of issuing an insurance card to someone you’ll never meet again after receiving their initial deposit.
Nothing wrong with that. What’s wrong is insurance rates are suppose to be tied to how likely your are to get in an accident. Higher credit score doesn’t mean you’re a better driver.
Whether we understand the causal relationship or not (and whether there is a causal relationship or not), there does appear to be a well-established correlation between high credit scores a lower rate of insurance claims. It is not necessarily an indicator that people with higher credit scores behave more responsibly. The correlation could be a matter of people with higher credit scores choosing to pay out of pocket for repairs because they don’t want their insurance premiums to go up.
Insurance companies have come up with many many different studies over the years to justify higher rates. And many are just not valid. Insurance in most states is one of those products you MUST buy. Not an option. You pay insurance in advance. If you don’t pay - you don’t get insurance. You don’t need credit to get insurance.
You didn’t click that link I posted, did you. Most of those studies were not funded or conducted by the insurance industry.
There is a proven inverse correlation between credit score and insurance claims.
I did click on the study…while most were NOT conducted by the insurance industry…many were still COMMISSIONED by the insurance industry.
What do you think of the ones that were neither conducted nor funded by the insurance industry?
I get it, you’re skeptical, but we’re not talking about any causation, or reasons, I’m strictly talking about the correlation. It’s a real thing.
I now see that you clicked on my link, but it isn’t a link to a study. It’s a link to my Google Scholar search results, which includes about 51,000 results.
Correlation is one way to look at it…and that’s what insurance companies do… it’s a moot point. If a person has good credit or bad credit - it doesn’t effect their ability to pay. You pay insurance in advance. If you don’t keep paying your insurance it’s cancelled…then you end up in a high risk pool.
Buying a car or house where you need to take out a loan and your credit code can effect your ability to pay, so loan companies give you a higher rate to lesson their risk if the person doesn’t pay. That’s not the way with insurance. You don’t take out a loan, you just pay for insurance up front.
Why is the correlation a moot point? It proves that, the higher your credit score, the less likely it is you will file an insurance claim, and vice versa.
This isn’t about ability to pay or take out a loan, it’s about identifying who is going to cost the insurance company more in claims.
If you live in Miami, you’re more likely to file an insurance claim than if you live in Jacksonville, so insurance companies charge more for insurance in Miami than they do in Jacksonville. Few people get upset about it, because they realize you’re more likely to file an insurance claim if you live in Miami.
It’s the same way with credit scores. If you have a low credit score, the risk of you filing a claim is higher. That’s hardly a moot point when you’re in the business of selling insurance.
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Because when you file an insurance claim your rates go up…substantially…so it’s moot.
That’s circular reasoning.
The correlation proves that, if you have a high credit score, you are less likely to file an insurance claim than someone who has a lower credit score. That your rates go up after you file a claim does not change the probability, proved by the correlation, that customers who have low credit scores file more claims than customers who have high credit scores.
Not it doesn’t. Tell me…where the analysis that was done…did it take into account people who with bad credit who live in poorer neighborhoods? Did they compare people with bad credit and people who live in cities and poorer neighborhoods to people who live in rural higher income areas? I didn’t see any of that analysis done. That will easily effect their data.
It’s like a study done about 10 years ago where some idiot tried to PROVE that African Americans were poorer risks for home loans, so they could justify charging them higher interest rates. Their study found that people in poorer neighborhoods had higher foreclosure rates. And since the vast majority of people living in the neighborhoods they studied were African American, so they concluded that African Americans were poor risks.
What that study didn’t take into account was the FACT that many areas in the country where there were poor white communities (mainly in the south), those areas had much higher foreclosure rates. They also didn’t compare people who bought a home at the high end of what they could afford compared to people in upper middle class and higher class areas…and those areas people who bought a home at the high end of what they could afford had foreclosure rates 2-3 times what people in poor people had. The problem was that people in poorer neighborhoods their income was so low that most of the homes in that neighborhood were at the high end of what they could afford…that really skewed the data.
That delves into causal relationships, which has nothing to do with my point. My point is that there is a proven inverse correlation between credit score and insurance claims.
I gave you a link to thousands of studies that relate to this correlation and prove it is a real thing. Your insurance score is based on many criteria, including where you live and your driving record, but I’m not arguing about the criteria used to establish your insurance score, I’m merely pointing out the correlation. I’ve proved it’s real, and I’ve proved it’s valid. Whatever rabbit hole you want to delve into about the reasons for that correlation, I’m not interested in having that debate, I’m only willing to discuss what I can prove, which is that the correlation is real, and the fact that doing business with people who have low credit ratings leads to higher costs in the industry, which justifies its use as one criterion in the calculation of an insurance score.
Well, all I can say is, if I was the one that owned the company that was taking a risk on YOU not having an accident, you can bet I would be using every tool available to identify that risk and determine how much to charge you based on it. Increasing your rates AFTER you’ve had an accident is like locking the barn door after the horse has already left. It does not mean I will get my money back. In fact, it’s a good chance you’ll bolt after I raise your rates to cover the payout I just made.
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You THINK you did…But as I pointed out it’s still very questionable. There are other factors to consider that I didn’t see. I don’t have time to analyze the studies. I’d have to see the exact data and methods they used. What I saw they explained at a very high level.
You haven’t convinced me of anything.
There are factors to consider if you want to debate the reasons for the correlation, but the correlation itself is binary; it either exists or it doesn’t, and I proved it does exist.
I don’t maintain any hope of convincing you that something that exists really exists. Evidently, for you, whether a correlation exists is as tribal as political views. Would you like to debate Newton’s Law of Gravity now?
I suppose if you wanted to debate the strength of the correlation, we could do that, but you seem stuck on it’s mere existence rather than its correlation coefficients and scatterplots.