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10 guidelines for the use of credit information in personal insurance for U/W & rating   Forum

Pop Quiz

What is the single most important argument in favor of using credit scores for pricing?

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

• key principles in the use of credit scores (with emphasis on customer consent)

Top Questions ← Questions you absolutely need to know!

reference	part (a)	part (b)	part (c)	part (d)
E (2018.Fall #7)	credit consent request: - wording of document
E (2018.Spring #3)	SCENARIO: - credit score proposal
E (2017.Spring #2)	see AAA.CrdSc	key principles: - customer consent
E (2015.Spring #6)	key principles: - using credit scoring
E (2014.Spring #7)	see AAA.CrdSc 1	see AAA.CrdSc	key principles: - using credit scoring	outdated

¹ This question is from ASOP 12 (Risk Classification) which is no longer on the syllabus, but similar concepts are covered in other papers from the current syllabus so you should still probably look at it.

In Plain English!

There isn't much to say about this paper. It's easy & short, 5 pages. Good bedtime reading?

Note that these credit score guidelines are federal, and guideline #1 is to comply with local laws.

• The local law in Ontario is that credit score cannot be used for personal auto pricing. That means the other 9 guidelines are irrelevant!
• Ontario does permit the use of credit score for property, however. This varies by insurer.
• I called my own insurance agent to find out if my carrier (Aviva) uses credit score. The agent called Aviva and reported back to me: no for auto, yes for property.

Memorize 4 of the 10 guidelines for using credit score in personal insurance. (The exam never asks for more than 4) A simple memorization question on these guidelines has appeared 3 times: (2017.Spring #2b), (2015.Spring #6), (2014.Spring #7c)

• In 2019, user genevieve posted a memory trick for all 10 guidelines this in the forum! • 2 years later rosiehan posted a baseball-related memory trick so make sure you click the link and scroll down to see both.

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BattleCodes

Memorize:

• 4 of the 10 guidelines (Memory trick for guidelines 1-5: LAC-PC)

Conceptual:

• How does this reading relate to the other reading that discusses credit score: AAA.CrdSc
• See also legal case #11 from Land.Cases (PIPEDA Report of Findings)

Calculational:

• none

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POP QUIZ ANSWERS

The single most important argument for the use of credit scores in pricing is that it is statistically significant. (Individuals with higher credit scores have lower claim costs.)