精东影业

Seventy-three percent of U.S. Consumers Have Raised or Maintained their Credit Score During Downturn, I.I.I. Reports

INSURANCE INFORMATION INSTITUTE听
Contact: Press Offices
New York: 212-346-5500; media@iii.org
Washington, D.C.: 202-833-1580

Arlington, VA, April 30, 2009 鈥� U.S. consumers are shedding debt and spending more responsibly during the current economic downturn, resulting in higher credit scores for many Americans, according to Dr. Robert Hartwig, president of the 精东影业 Information Institute (I.I.I.), who testified today before the (NAIC).

In fact, 43 percent of U.S. consumers increased their credit score earlier this year, while only 27 percent saw a decrease, and 30 percent remained unchanged, San Francisco-based Credit Karma found, in a March 2009 report based on a sampling of tens of thousands of U.S. consumers, Dr. Hartwig said.

鈥淭hus a silver lining of the current financial crisis is a change in the credit profile of the average American household whereby outstanding debt is reduced to more manageable levels. This should lead to an improvement in the health of the typical consumer鈥檚 (and family鈥檚) balance sheet,鈥� Dr. Hartwig stated. 鈥淚t is a common misconception that during a recession virtually all consumers鈥� credit scores, and hence insurance scores, will fall.鈥�

The I.I.I. president鈥檚 remarks came today as part of his formal testimony during the NAIC鈥檚 all-day public hearing on the impact of credit-based insurance scores on consumers. An insurance score is a numerical ranking based on an individual鈥檚 credit history. Actuarial studies show that how a person manages his or her financial affairs is a good predictor of the number and size of insurance claims they may file. Indeed, insurers have used this rating criterion for almost 20 years in order to differentiate effectively between lower and higher insurance risks.

鈥溇耙� scoring is a proven, accurate, objective and consistent risk assessment tool used widely in the underwriting of auto and homeowners insurance. The data supporting its use are statistically irrefutable, and the benefits to consumers are significant,鈥� Dr. Hartwig testified 鈥淢oreover, the use of credit information leads directly to a fairer and equitable premium charge for all policyholders because scoring allows premiums to be more closely matched to risk.鈥�

鈥淚mportantly, insurance scores incorporate only those elements from credit reports that correlate with future loss,鈥� Dr. Hartwig added.

The NAIC鈥檚 hearing comes at a time when numerous state legislatures are considering laws which would either restrict or ban outright an insurer鈥檚 use of credit-based insurance scores when rating potential auto and homeowners insurance policyholders, or determining the premium they should charge for these products.

鈥淧rohibiting insurers from using credit-based insurance scores would instantaneously result in inherently unfair outcomes: higher rates for people with lower risk, and lower rates for those with a higher likelihood of submitting claims. In other words, bans or severe restrictions on insurer use of credit-based insurance scores would lead to massive subsidies for people who impose greater costs on the system,鈥� Dr. Hartwig stated.

The I.I.I. president also noted that the property/casualty insurance industry鈥檚 risk management model had proven more resilient during the current economic downturn than that employed by U.S. banks, in part because of the ability of P/C insurers to measure the financial histories of the customers with whom they conducted business.

To arrange an interview on this topic with Dr. Hartwig, contact Michael Barry, vice president, Media Relations at 212-346-5542, or via email at michaelb@iii.org.

For Dr. Hartwig鈥檚 full NAIC testimony, go to I.I.I. Testifies on Credit Scoring.

For a background paper on credit scoring, go to Issues Update: Credit Scoring.

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.