Credit-Based Insurance Scores Flashcards

1
Q

insurance industry challenges to FL legislation limiting use of credit-based insurance scores (4)

A
  • state does not have authority to prevent use of credit-based scoring (judge said it does)
  • state does not have authority to define “unfairly discriminatory” (judge said it does)
  • insurers do not have data to demonstrate impact on protected classes (judge said this is irrelevant)
  • definition of “disproportionate impact” is too vague (judge agreed; it will be revised)
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2
Q

possible regulatory actions around credit-based insurance scores (5)

A
  • regulator access to scoring models
  • notify customers about use
  • restrict decisions based solely on credit history information
  • ban use when rating existing customers
  • prohibit use to cancel, non-renew, or increase rates
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3
Q

classes that credit reports have disproportionate impact on (6)

A
  • young individuals with no credit history
  • elderly
  • certain religions
  • disabled
  • recently naturalized citizens
  • recent divorcees
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4
Q

define credit-based insurance score

A

a numerical score that incorporates attributes from an individual’s credit report

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5
Q

insurer uses for credit-based insurance scores (2)

A
  • underwriting: whether to accept a risk

* risk segmentation: directly as a rating factor or tier placement

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6
Q

argument in favor of using credit-based insurance scores

A

they help insurers segment risks to determine appropriate rates because there is a strong correlation with expected costs

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7
Q

argument against using credit-based insurance scores

A

there is a disparate impact on low-income and protected classes, so costs outweigh benefits of increased pricing sophistication

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