By the numbers. (Briefing).Credit Information Debate Rages Rages (rā`jēz) or Rhagae (rā`jē), ancient and medieval city of Persia, located on the site of modern-day Ray, N Iran, a suburb of Tehran. On The use of credit information and insurance-based credit scoring Credit scoring A statistical technique that combines several financial characteristics to form a single score to represent a customer's creditworthiness. in setting premiums for automobile automobile, self-propelled vehicle used for travel on land. The term is commonly applied to a four-wheeled vehicle designed to carry two to six passengers and a limited amount of cargo, as contrasted with a truck, which is designed primarily for the transportation of and other personal lines insurance is creating controversy in dozens of states. Proponents say there is a correlation correlation In statistics, the degree of association between two random variables. The correlation between the graphs of two data sets is the degree to which they resemble each other. between credit history and insurance risk, and using the scores can mean lower premiums for credit-worthy adj. 1. having an acceptable credit rating; worthy of having credit extended; as, a credit-worthy customer s>. policyholders. Consumer advocates have attacked the practice as discriminatory dis·crim·i·na·to·ry adj. 1. Marked by or showing prejudice; biased. 2. Making distinctions. dis·crim .
Average Omission Rate for Selected Convictions
Some proponents contend that relying on motor vehicle records alone is
not satisfactory, because the records can be inaccurate.
% Convictions Missing From Department of Motor Vehicle Records
Negligent/ 28.5%
Reckless
No Insurance 21.0%
Unsafe Driving 21.0%
License/ 20.0%
Registration
Illegal Turn 19.3%
Defective/ 16.0%
Impaired Equipment
Inspection/Plates 15.0%
Driving Under 14.8%
the Influence
Stop Light/Sign 11.8%
Speeding 10.0%
Source: Insurance Information Institute; Insurance Research Council,
Accuracy of Motor Vehicle Records (2002)
Note: Table made from bar graph
Personal Automobile Loss Ratio By Credit Category
Data from a group of policies in force for some or all of the period
between 1993 and 1995 showed policyholders with excellent credit ratings
had loss ratios well below the average.
Loss Ratio
Earned Incurred Loss Relativity
Category Premium Loss Ratio Average=100
A $74,279 $75,333 101.4 133
B 158,922 124,723 78.5 103
C 69,043 47,681 69.1 91
D 91,746 52,688 57.4 75
Total $393,990 $300,425 76.3
Category A--Unacceptable credit rating
Category B--No established credit history (or does not meet the
definition of A, C or D)
Category C--Good credit rating
Category D--Excellent credit rating
Source: Insurance Information Institute, Casualty Actuarial Society
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