Credit Scoring for Insurance: Fundamentals, Compliance, and Reform

Summary

This practice note deals with the history, use/misuse, and ongoing reform of insurers' use of consumer credit scores. Controversy has long brewed about using credit scores as an element in an insurer's decision-making process to issue or renew an insurance policy and determine the premium to charge. The discussion focuses primarily on automobile insurance as it is required by law for all auto owners and those who operate them. Therefore, most consumers must have it. Further, and for that reason, it comprises a large portion of the risk assumed by authorized insurers licensed to write personal lines property and casualty insurance.