Life: insurance companies want to be fair

Contrary to “The Insurance Commissioner is Right” (Our Readers’ Views, December 15), the insurance industry’s use of credit histories is not “ethically bankrupt”. Since 1945, all national insurance regulations have required companies to offer prices that are “adequate, not excessive and not unfairly discriminatory”. Fair discrimination is simply recognizing that different groups have different propensities to lose.

Working as an actuary for a small insurance company, I was responsible for overseeing data analysis to ensure these fair and adequate rates. The introduction of credit history provided a surprisingly significant correlation between loss history and credit score. It was much more correlated than address, driving history, driver age, etc. By ignoring (or banning) this rate variable, our politically motivated insurance commissioner condemns those of us who behave responsibly to unfairly subsidize those who are less responsible.

We should all strive to have a rate plan that incentivizes insurance companies to be happy to accept any potential customer because they all generate the same profit potential. Without at least the break-even point, insurers wouldn’t be there to pay for the losses we hope not to have, but inevitably do. Just more proof that facts don’t matter to some people – only equal results, whether “equal” or not, are fair.

Kristan F. Talley