Question

The use of credit scoring in underwriting and pricing auto insurance

	A.	has never been shown to be predictive of insurance loss experience.
	B.	is illegal under federal law because it discriminates against lower-income drivers.
	C.	is utilized primarily because it reflects the driver's ability to pay premiums.
	D.	None of the above,

Answer 1

A.has never been shown to be predictive of insurance loss experience.

Credit scores predict credit delinquency whereas insurance scores predict insurance losses. Though both are based on a person’s credit report, an insurance score does not measure how much money a consumer makes; rather it serves to measure how well an individual manages their money. Emphasis is placed on those items associated with credit management patterns proven to correlate most closely with insurance risk, such as outstanding debt, length of credit history, late payments, collections and bankruptcies, and new applications for credit.