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NAMIC Says New Texas Study Puts To Rest Question of Relationship Between Credit-based Insurance Scores and Claims

Two Million Policyholders Surveyed at Request of Texas Legislature

INDIANAPOLIS (Jan. 6, 2005)––The latest study released by the Texas Department of Insurance is another in a long line of studies that validates the use of credit-based insurance scoring, according to the National Association of Mutual Insurance Companies (NAMIC). The plain facts of the study clearly indicate that individuals with low scores have a higher risk of loss. Additionally, the study found that individuals with low scores also have more frequent losses.

“Credit-based insurance scoring is color blind, fair and clearly predictive,” said NAMIC State Affairs Director Neil Alldredge. “The insurance industry and independent experts have repeatedly demonstrated that insurance scores are predictive of loss. Using this legitimate underwriting tool allows insurers to more accurately price products, providing more consumer choice in the market.

“Critics of scoring have pointed to the findings in the study that certain minority populations have a higher incidence of low insurance scores as evidence of discrimination. What is lost on these critics is the distinction between fair and unfair discrimination. It is fair to charge consumers a rate that reflects their risk of loss. Using insurance scores in the underwriting and rating process allows this to occur. To do otherwise is unfair to all consumers.”

“The findings are consistent with nearly every other study conducted,” said Alldredge “It is hoped that this will settle the question about whether there is a correlation between low scores and higher risk of loss.”

Posted: Thursday, January 06, 2005 12:00:00 AM. Modified: Thursday, January 06, 2005 11:34:22 AM.

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