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.
Pop Quiz
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 (2018.Fall #3) Porter.2-Devlpt Porter.2-Devlpt arguments against
- credit scoresE (2017.Fall #1) see Kucera.Credit arguments against
- credit scoressee Kucera.Credit E (2016.Spring #1) disparate impact:
- gendercredit score vs frequency
- explainE (2015.Fall #1) disparate impact:
- agedisparate impact:
- other than agemetrics / drivers:
- underlying credit scoresE (2014.Fall #2) definition:
- cost-based ratesequitable rates:
- 2 conditionstexting
- is it equitableBloom's Taxonomy:
- financial stabilitysee NAIC.IRIS Bloom's Taxonomy:
- proxy variablesE (2014.Spring #5) see Kucera.Credit arguments against
- credit scoressee 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.) It overlaps with Kucera.Credit but focuses more on potential problems with using credit-scoring in ratemaking.
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)
- mini BattleQuiz 1 You must be logged in or this will not work.
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)
- mini BattleQuiz 2 You must be logged in or this will not work.
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: (It's also included in the mini BattleQuiz)
- E (2014.Fall #2)
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