|Targeted News Service|
In his testimony before the
"Let's begin with a clear understanding of what this rating and underwriting tool really is," Woods said. "Credit-based insurance scores measure the insurance risk, not the credit risk, of consumers; they are generated from credit histories and insurance claims data, and are distinct from scores based solely on credit histories intended for other business purposes such as making decisions on loans. Several studies have found that credit based insurance scores are among the three most predictive tools available for automobile insurance. The predictive value of credit based insurance scores has been hotly debated and vigorously studied over the last decade, and every credible study that has been done has found that they are highly predictive of insurance losses."
Woods testified that hundreds of pages of studies have been done on this issue. The most exhaustive studies have been done by the
Woods also referenced a 2012 study by the
"If credit based insurance scores were banned, the 13% who are currently paying more for their insurance based on their predicted losses would see their premium decreased," Woods said. "The losses would still occur, and the other 87% of consumers would have to pay more premium than their predicted losses call for in order to subsidize the higher risk insureds. Even if you factor out the consumers with neutral results, more consumers would be hurt by a ban on the use of credit based insurance scores by a 3.35 to 1 ratio; 43% would lose credits while 13% would be subsidized."
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