By the numbers. (Briefing).

Credit Information Debate Rages On

The use of credit information and insurance-based credit scoring in setting premiums for automobile and other personal lines insurance is creating controversy in dozens of states. Proponents say there is a correlation between credit history and insurance risk, and using the scores can mean lower premiums for credit-worthy policyholders. Consumer advocates have attacked the practice as discriminatory.

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