The Texas Department of Insurance (TDI) has recently conducted a legislatively mandated study on the use of credit scoring. The study is significant, in that it analyzed policyholder data at the individual level to determine whether credit scores are an effective predictor of risk, and to examine the impact of its use on different classes of consumers. The study found that six out of ten drivers in the state with the worst credit scores were black or Hispanic.  Low- and moderate-income drivers and people 30 and younger tended to have poor credit scores as well.  The study also found a “strong correlation” between poor credit scores and the probability of filing an insurance claim, a result that is consistent with some earlier studies. Robert Hartwig, chief economist with the Insurance Information Institute (III), said that insurers aren’t biased against any group of consumers and do not use racial, ethnic or income information as underwriting criteria.

TDI Report on Use of Credit Information (12/30/04)

January 6, 2005