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November 16, 2004
The Credit Score: Are You Ahead or Behind?
"Actuarial studies show that how a person manages his or her financial affairs, which is what an insurance score indicates, is a good predictor of insurance claims," according to the Insurance Information Institute, the D.C.-based industry group. "Statistically, people who have a poor insurance score are more likely to file a claim."
But insurance scoring has been controversial. While insurers say two-thirds of policyholders have a lower premium because of good credit, many consumers and lawmakers are wary. Forty-eight states -- including Maryland and Virginia -- have taken actions that restrict credit scoring in insurance underwriting, such as prohibiting insurance companies from denying coverage or canceling policies based solely on credit information, and requiring insurers to disclose primary factors on which any adverse action is based.
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Posted by Tom Troceen