Topics and Issues

Credit-based Insurance Scores (CBIS) (15)

An actuarial study published in 1996 by Tillinghast, an actuarial consultant firm, showed a “highly statistically significant” correlation between insurance scores and loss ratio—the cost of claims filed relative to the premium dollars collected. In other words, people who have low insurance scores, as a group, account for a high proportion of the dollars paid out in claims. A subsequent study published in 2003 in the Casualty Actuarial Society Forum came to similar conclusions: “From a statistical and actuarial point of view, it seems to us that the matter is settled: credit does bear a real relationship to insurance losses.”