McCarty.Credit

Representing the NAIC, McCarty presented his views on the impact of credit-based insurance scoring on the availability and affordability of insurance. This reading is closely related to Kucera.Credit.

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BattleTable

Based on past exams, the main things you need to know (in rough order of importance) are:

• disparate impact of credit scoring on certain classes of insureds
• arguments against use of credit scores (see Kucera.Credit for arguments for use of credit scores)

reference	part (a)	part (b)	part (c)	part (d)	part (e)	(part f)
E (2017.Fall #1)	see Kucera.Credit	arguments against - credit scores	see Kucera.Credit
E (2016.Spring #1)	disparate impact: - gender	credit score vs frequency - explain
E (2015.Fall #1)	disparate impact: - age	disparate impact: - other than age	metrics / drivers: - underlying credit scores
E (2014.Fall #2)	definition: - cost-based rates	equitable rates: - 2 conditions	texting - is it equitable	Bloom's Taxonomy: - financial stability	see NAIC.IRIS	Bloom's Taxonomy: - proxy variables
E (2014.Spring #5)	see Kucera.Credit	arguments against - credit scores	see Kucera.Credit

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In Plain English!

This paper is easy - good bedtime reading. (You only have to know the first 11 pages.)

Question: identify arguments against the use of credit-scoring [Hint: FEED]

Frequency (credit score is correlated only with frequency, not with severity of claims)

Errors (50% of credit reports have errors, sometimes due to identity theft)

Economic downturns (downturns in economy may have a disparate credit impact on vulnerable populations)

Discriminatory (credit scoring may lead to rates that are unfairly discriminatory - see below for details)

Question: identify examples where credit scoring can be unfairly discriminatory

age: young people don't have a long credit history, elderly people use credit less often (both may result in a lower credit score)

poor families: may use cash versus credit (you need to use credit to get a good credit score)

recent immigrants: may not have access to credit (you need to use credit to get a good credit score)

moral/religious beleifs: certain belief systems may discourage use of credit (you need to use credit to get a good credit score)

There are a few miscellaneous items from old exams that are covered in the mini BattleQuiz. Make sure you look at the following problem because it ties together concepts from a few different readings:

E (2014.Fall #2)

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BattleCodes

Memorize:

Conceptual:

Calculational: