rzyzzy said:Actually the "competition" isn't very fierce and in most states the product isn't an optional purchase - it's required by law ( laws that were bought and paid for by the insurance lobby).Not if you buy a bond or put money on deposit with the state DMV. Then you can opt out of purchasing insurance.

As for competition, what state are you interested in? Southeastern states have around 200 companies selling auto insurance. You don't consider 200 companies all vying to sell you the same product competition?
As for customer's leaving, yes some will, but many won't - and those that do leave will be replaced by a crop of new drivers, often poached from other companies with a one-time lowball quote, that ratchets up slowly and steadily like a lobster in a pot.The drivers that don't leave are exercising their freedom of choice. Some drivers value service over price. Some just don't care enough to shop frequently. And those customers that were poached from other companies with low rates will be poached right back with even lower rates if the company steadily increases rates.Your contention that "a statistical analysis won't result in an overall increase in rates" is EXACTLY the point I am making - it will result in increased rates.It's this certainty that is so pathetic. Where is your evidence? You must have performed some statistical analysis to so easily dismiss the actuarial studies that have been linked in this thread. No? Just more arguing from ignorance?If not, the insurance company wouldn't bother with the "analysis". It's all about creating a plausible lie.No. It's all about avoiding adverse selection. That's an economic term, so I don't expect you to be familiar with it. I'll explain with an example.

Let's say you start an insurance company. You haven't bothered with statistical analysis of driver characteristics, because you're comfortable with your ignorance. So you price people who live in urban areas the same as people who live in the suburbs and rural areas. I work for a different insurance company. I think that, because urban areas have higher crime rates and higher congestion and traffic, it's possible that car theft and car accidents are more likely in cities than in less populated areas. I do a statistical analysis that confirms my hypothesis, and I charge suburban and rural drivers less money than you do. Most of your suburban and rural (i.e., least risky and most profitable) drivers leave your company and come to mine. You are left with primarily urban drivers. Because you probably priced your book of business assuming a mix of urban, suburban, and rural drivers, you are probably charging an insufficient rate. So you will go bankrupt. That is adverse selection.

rzyzzy said:barefool said:rzyzzy said:The reason some states won't allow it is because it's not true. It's simply another thing the insurance companies do to increase their profits at your expense.You should refrain from making definitive statements without evidence. Insurance companies have proven, through statistical studies, that risk is correlated with credit score. That's why regulators let them use credit in the rating algorithm.

And rates aren't increased by using credit scores. Rates are simply adjusted corresponding with risk. People with high credit scores actually pay lower premiums due to their lower risk. It's a good thing.

I would advise you not to make statements without evidence as well. I had a personal experience with this, and my rates went up - the reason given by my agent at the time was that my credit score had dropped.

The only thing the insurance companies have proven is that they are greedy, opportunistic, and anti-competitive, unless the government holds them back.

EVIDENCE

It's six pages, so I've pasted a relevant section below. Bottom line - you've been fed some kool-aid. Since you believe your score is fine, this issue doesn't matter. When it affects you, then it will become a problem.

See the facts below....

The Attorney General’s office finds it problematic for three reasons:
1. There is little or no transparency in the insurance industry. Consumers have no way of knowing which specific factors are being used to determine their insurance premiums. In the case of a “credit score,” these numbers may be based on a credit report, but are not identical to those reports. Simply reviewing a credit report will not offer a consumer a clear picture of what factors an insurance company has used to set that score.
2. There is little rational and independently verified correlation between a poor credit rating and a poor driving record.
3. Credit reports are notoriously error-ridden. Using an inaccurate report to determine an insurance premium is unwise and unfair.

If you don't agree with this, that is your perogative - however for every correct and accurate credit report, there is a gamer willing to do "bumpage" or the usual creditboard tricks to falsely increase their scores. And more than a few people, including myself have been dinged for things we didn't do, and we've had NO LUCK in removing inaccurate derogatory information from our reports.

100%......and these ah's raised my rates as my credit score got lower.....reason....shopping for auto insurance was creating credit checks for the quotes and that was why the score was getting lower....and letting them charge more. What a great country.

rzyzzy said: What I DID say was that the "science" used to justify high rates for everyone is garbage. Everyone has a something about them that could be used with enough junk science to "prove" them to be an increased risk.

You "said" it, but you backed up your claim with...nothing. Do you think you should believe me if I assert that the sky is yellow, without an ounce of proof? Why should I accept your assertion?

barefool said:So do you think that banks should not use credit reports to underwrite loans?

Hmm... someone opened a door here, didn't they? I think it's pretty obvious, given the current economic circumstances, that a blind reliance on inaccurate credit reports and scientific "models" combined with a little corporate greed isn't a good thing for banks, insurance companies or taxpayers.

Maybe that's my point.

Maybe there's a lack of trust on my part, call me "ignorant" if you want... wait... you already did!

Since we both own a fairly big chunk of AIG(I'm assuming you're in the US), perhaps you can help them with their "models" and I can help them with their morals.

FatWalker said:100%......and these ah's raised my rates as my credit score got lower.....reason....shopping for auto insurance was creating credit checks for the quotes and that was why the score was getting lower....and letting them charge more. What a great country.Insurance quotes count as soft pulls on your credit report. They don't affect your score. More inconvenient facts.

rzyzzy said:Are we supposed to believe that the insurance companies are benevolent creatures that only look out for the best interests of their policyholders?Insurance companies look out for the best interests of their owners. For mutual companies, the owners are the policyholders, so the companies really do look out for the policyholders. For stock or private companies, the owners are shareholders or directors. In whatever case, the companies try to maximize their profits. Maximized profits come from striking a balance between rates high enough to be profitable and low enough to attract and retain customers.They never gouge their customers, or try to weasel out of valid contracts?Of course they do. There are literally thousands of insurance companies in this country. A certain percentage of the companies will be shady. Or even a certain percentage of employees at reputable companies will be shady. Either way, it's a poor argument to assert that the certainty of some insurance company employee, somewhere, mistreating a policyholder justifies draconian regulation of the entire industry.Are we to believe that NO regulation is necessary for this industry? I'm pretty sure I saw a post a couple of pages back asserting just that, was it yours?It was my post. And my opinion, and that of the study I linked to was that no pricing regulation is necessary. I think forms should be regulated and I think that regulators should spend most of their energies on solvency and customer care enforcement.
Hide behind the "free market" all you want, I'll take my chances with government regulation and a dose of "red tape" on the side.Even if the red tape harms consumers more than the free market ever could.

Slydawg1 said:I have a high credit score so one would think that my rates would be cheap. My insurance is not cheaper than a normal person with a low credit score. I think the companies use whatever criteria they want in their favor.

Example: They will penalize a person with a low credit score and then not reward a person like myself with a 780 fico. They are shady!

If your rates are lower then the person with a low credit score isn't that rewarding you for the 780 FICO? Assuming you and the other driver have everything else the same.

This is just another excuse by insurers to charge more. I could also make a case that certain ethnic types, religious groups or women have higher accident rates as well. However, the logical person would see that there is no direct correlation between the person and the event (accident rates).

If you ask me, there should only be only a handful of criteria that are used---and all should be tied to the PERSON instead of groupings that they share. 1.) Previous accident history for which they were at fault 2.) Drunk Driving/Vehicular manslaugher convictions. It is insane that any insurance company would take on a drunk driver again.
3.) type of vehicle.

Otherwise, if we are going to discriminate on groupings, lets put all groupings on the table from blood type to credit score.

chrisagile said:This is just another excuse by insurers to charge more. I could also make a case that certain ethnic types, religious groups or women have higher accident rates as well. However, the logical person would see that there is no direct correlation between the person and the event (accident rates).More indignant ignorance. You should read the entire thread to see why 1) credit scoring doesn't lead to higher rates, on average, and 2) that there are valid statistical studies showing that credit is correlated with risk to insure.

P.S., Women actually pay lower rates than men for auto insurance. Just something else you didn't know.

aeiouy said:Xnarg said:If someone thinks it's a great idea not to allow insurance companies to determine risk however they want, then I encourage him to start his own insurance company and not use the risk factors he sees as wasteful.

Fairly ignorant considering insurance for automobiles is something a person MUST have if they want to drive a car in most cases.

So the consumer doesn't have a choice. They have to essentially like it or lump it, and the insurance industry collectively knows this, that is why they cook up these angles to boost their profitability. It is not an open market place. It is a closed marketplace that is fixed against the consumer, because the consumer does not have a legitimate choice to just do without.

Buying insurance is not required. If you deposit $35k with the California DMV, they will issue to you a self-insurance certificate.