Risky Business
What's my Credit have to do with it
What's my Credit have to do with it?
We hear this more and more, but the reality is that our own individual credit rating is directly involved in many parts of our lives we may not even realize.
Long gone are the simple old days when a credit score was just for the credit card application or the loan for your next car or home.
Your credit is now part of the process in many aspects of our lives including the premium charged for insurance.
Studies have shown that a person who is responsible with financial obligations is also more likely to be a responsible driver. When this first came out several years ago, I didn’t believe a word of it, and even rallied to Progressive that it shouldn’t be used as an Underwriting tool to establish rates.
I was wrong. I can’t say I fully understand WHY the correlation exists…. or even if it’s causal, but poor credit has proven itself to be an indicator of probable insurance losses at least in the experience of this agency.
I guess if we think it through, one of the most difficult aspects of the insurance business is to more accurately determine risk. There is no crystal ball, after all, for the bean counters who establish insurance rates.
I suppose if it were my “bet†on the table…which is all insurance coverage really is… I’d have to say that I’d rather have $1,000,000 Liability on the line for a person who has an established record of paying their obligations responsibly in the past versus someone who has a more “sketchy†past.
Whether we all agree with it or not is a moot point, though. Almost all Insurance Carriers now use the “Insurance Credit Score†model that is pulled up when your date of birth, driver’s license and address is plugged into a quote.
We’ve all watched the phenomenal growth of Facebook, where personal information that folks voluntarily submit is then sold to outside companies. I believe we can conceivably see previously “private†data used in the future for all types of rating.
So watch your bills and watch what personal info you share!
Warm Regards,
Shelly Benisch, CIC Commercial Insurance Solutions (CIS)