Focus Group Research
on the Use of CreditBased Insurance Scores
Focus Group Locations
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Chicago, IL
Austin, TX
Portland, OR
Baltimore, MD
Focus Group Objectives
• Assess consumer knowledge of factors that
influence the cost of insurance and credit history
• Gauge consumer reaction to use of credit-based
insurance scores
• Determine consumer acceptance of/resistance to
use of credit-based insurance scores
• Solicit suggestions for increasing consumer
acceptance of credit-based insurance scores
Key Findings
• All groups identified property/casualty insurance
as major household expense
• Participants were generally aware of commonly
used risk factors for auto insurance
• Participants were not aware that credit-based
insurance scores were used as a risk factor
Key Findings
• Women were more opposed to the use of credit
scores
• Women were more empathetic to circumstances
“beyond an individual’s control”
• Men were driven by the economics of the issue “show me the money”
Most Participants
Intuitively Opposed
Focus group research indicates that a distinct
majority of consumers are generally and intuitively
uncomfortable with - if not outright opposed to the use of credit-based insurance scores as an
underwriting and rating factor.
Key Reasons for Opposition
• Don’t believe a relationship or a correlation
between credit history and risk exists
• Use of credit an “invasion of privacy”
• Major objections to lack of disclosure during
application/renewal process
Key Reasons for Opposition
• Fear credit report inaccuracies can hurt them
• Believe credit reports may be skewed by
temporary, extenuating circumstances
• Concerned that credit scores are
disproportionately weighted
The Bright Side
Resistance lessened as discussion progressed and
participants were provided more information on
use of credit-based insurance scores. Majority of
participants came to accept the practice of credit
scoring - with caveats.
Credit Scoring Conditions
• Disclosure at the outset of sales presentation
• “Plain English” explanation of correlation between
credit and risk
• Insurer explains that only the score - not full credit
history - is used
Credit Scoring Conditions
• Consumers have chance to explain “extenuating
circumstances”
• Consumers provided with information on their
own score and how they can improve it
• Insurers disclose impact of insurance score on
overall premium
Summary
• Consumers may “grudgingly accept” the use of
credit-based insurance scores
• “Grudging acceptance” is a victory for insurers
• Acceptance will not come easily
• More than a matter of message
• Insurers must address consumer concerns to break
cycle of complaints directed to policymakers
Summary
• Legislative bans triggered by consumer complaints
• NAII local counsel survey - 42 states to consider
legislation in 2003
• Major political issue in 2003
• Dangerous legislative precedent set by new laws in
Maryland and Washington