Vehicle insurance company after company is claiming nowadays that they can show research that the worse your credit it, the more likely you are to file a car insurance claim. But is that really true? After all, the research that they show tends to be more about correlation than causation, and it just isn’t the same thing. It’s the sort of thing that really bugs the head of Georgia’s department of insurance. According to John Oxendine, car insurance companies keep on using the word correlation when justifying their use of credit in insurance risk scores because they don’t have any real evidence that it does. Causation is evidence, he says. Correlation is just coincidence.

Oxendine does say that credit history does have some use when it comes to car insurance companies. They can be used to help vehicle insurance companies avoid the growing menace of fraud just by looking at a person’s credit report. This won’t help in all instances, but it is a good indication. However, he doesn’t trust any type of insurance scoring involving credit, especially when the end premium is determined by some kind of statistic.

If you put plenty of numbers together, you can get anything out of that, and it won’t really mean anything at all, he claims. He says that the government should start regulating more stiffly the way that car insurance companies decide how to charge people, because a lot of their new methods now that they have a more complicated system–a lot of them just don’t make any sense, and are randomly used to charge good drivers higher premiums.

Oxendine has been doing his best to get the vehicle insurance companies to fess up to the method that they use to calculate the insurance risk scores. We have some idea of what factors go into them, but no real idea of how they get to the result. Oxendine says that they are deliberately trying to hide the way they do things to keep people who buy insurance in the dark. The reason for this, he says, is because the more that people know about their car insurance the more likely they will be able to avoid getting tricked into higher premiums.

According to Dan Kummer from the National Association of Independent Insurers, Oxendine couldn’t be more off the mark. He claims that the process isn’t so cut and dry as Oxendine seems to think and believes that the credit based insurance risk score is one of the best factors that has come into the premium determination process in the past few years. The reason, he says, that the vehicle insurance companies don’t want to share their methods is because it took them so long to come up with them. They are, in a way, trade secrets. They don’t want to have to tell other car insurance companies what their secrets are.

The Texas Commissioner says this is a very tricky way to go about things. After all, the longer the car insurance companies keep secrets, the less we know about what relatively harmless actions and qualities have an effect on our car insurance premium.

Cheers,

Fashun Guadarrama.