Insurance Credit Scoring: An Ethical Issue

It is the use of a consumer credit score underwriting tool for auto insurance rates. What is a credit score or FICO score? A FICO score is a credit score of Fair Isaac & Co. Credit scoring is a method for determining the likelihood that credit users to pay their bills. Fair, Isaac began its work with credit ratings in the late 1950s and later has since Scoring far too much credit as lenders reliable credit assessment. A credit score attempts to condense a borrower’s credit history into a single point. Fair, Isaac & Co. and not to betray the information that these values are calculated. The Federal Trade Commission has decided that it is acceptable.

Is not it interesting that the largest partition in our financial life, our results on consumer credit does not once again contain full disclosure? As already mentioned the Federal Trade Commission has decided that it is ok for Fair Isaac & Co is not the disclosure of algorithms used in this process, but how is it consumers’ rights.

While it is important to understand what is a FICO score is not the main theme of this paper, insurance are the prices. So where is the link? Public all know is that we talk about Fair Isaac, there is a strong correlation between people with bad credit and high risk drivers. This notion is insane and what I see in this black box approach, there is no real causal link between the two.

Such reasoning is similar to the conviction of a person of something, even before they have committed a crime. For example, say I do a study and this study shows, there is a strong correlation between criminals and people with bad loans. Does this mean that just because you have poor credit you tend to commit a crime and, therefore, you must profile imprisoned or perhaps because you are a danger to society?

This system is discrimination against minorities, the disabled and in my case college students, among others. Fair Isaac & Co argues that they are not showing the use of algorithms to calculate these correlations and partitions because they fear that the task would be valuable information, very expensive to develop and maintain. What about costs to consumers who can pay higher prices or in case of bad even refused insurance on the basis of these practices.

The Equal Credit Opportunity Act prohibits creditors, taking into account race, sex, family status, national origin and religion, but if we do not even know how these companies are calculating these values, as in the world, we might be whether or not they are discriminatory. The smoke and mirrors of this approach is to do what many authorities, discrimination subtle blackmail and money the United States.

What is it blackmail? As I blackmailed on this issue comes to mind. Webster defines it as blackmail to “obtain by force or coercion.” By the tactics of non use of these consumers are forced to pay higher prices. First, 90% of all insurance companies use this procedure, secondly, in the interest of society legislation requires all Americans with cars to auto insurance. Live in a country where it is virtually impossible to live without this car is not some force for the rate of pay? In addition, you can say, can not afford to buy a car with cash, in this case, you may get only liability insurance and save an amount of money, but you take a loan, the bank is necessary to cover the entire car insurance coverage until you pay them the loan. In this case, in May not to an extreme case of blackmail, it is not to be on the connection.

Any insurance himself as a representative of peace of mind, protection and security, but at what price. Over the past 10 years, I spent nearly 20,000 dollars in car insurance, what I have argued? Maybe less than half, and I have a total of the car. Insurance is only a form of legalized gambling protected by the government? The McCarran-Ferguson Act of 1944 acknowledges the assurances of antitrust laws, so here we are again without a choice; agreements is the rule, not competition. Where there is ethics, the legislature? Many countries, screaming about this controversial, and some states like California have some success, but with the protection of government above what can consumers do?

I personally wrote to the governor of Pennsylvania on the subject, one of my questions was most important;

“I am a concerned citizen. Recently, I found my auto insurance price increase on a high. I consider the situation only to discover that my credit rating was the difference, not my conduct.”

I got the answer from the insurance division follows:

This letter is a response to your complaint with the Pennsylvania Insurance Dpartment by Governor Edward G. Rendell ’s office correspondence on the application of purchase credit as a tool for auto insurance in Pennsylvania.

I have your concerns and it seems that the investigation underwriting motor insurance. In particular, the use of credit in determining eligibility. Many factors go into the underwriting of insurance contract, such as type of vehicle, the driver, site, etc and ultimately credit history. Pennsylvania law does not prohibit an insurance company, credit fromusing underwriting tool as long as it is done in the first 60 days of a policy of writing. Under the law, an insurance company is a window of 60 days of creating a policy to determine if the policy is within the guidelines of the company.

In your letter you stated credit scoring in part of the structure and ratings are probably the division of insurance. In fact, the credit ratings is part of the company, the underwriting guidelines and the rule Dapartment only subscription guidance, since they are not discriminatory.

In addition, federal law under the Fair Credit Reporting Act allows credit information for underwriting financial services and insurance transactions.

Best regards,

Debra L. Roadcap

Consumer Services Investigator

I got the answer just what I want an answer, of course, acquire the Federal Law and the Fair Credit Reporting Act to allow the use of this information, but the real question is why? An answer to this question is still not received. I think it’s a very unethical, in which insurance companies are the rules to use free, low-income families, single mothers, the disabled, minorities and others. If the government wants to do, they should assess consumers about what they did individually, not what scientists assumed they would not, on the basis of the history of the other.