A friend of mine says there are no good or bad pets, only good or bad pet owners. The same can be said of technology toolsinherently theyre neither good nor bad. It depends on what people do with them.
For example, advocates of insurance scoring say insurers that use it are good technology ownersthe computerization of credit data, they assert, allows insurers to underwrite and price more accurately and offer lower premiums to customers with good credit (for more, see Where Credit Is Due, p. 16). Critics claim the practice is discriminatory and unfair.
A May credit-scoring report from the Insurance Information Institute (III) provides an overview of research and state and federal actions. Included in the research: In Texas, a study found a strong relationship between credit scores and claims experience. . . . Although there was a consistent pattern of differences in credit scores among different racial/ethnic groups, with blacks and Hispanics having worse scores than whites and Asians on [average, the study] found the results were actuarially supported and not unfairly discriminatory. On the other hand, the III points to flawed methodologies for a Missouri Department of Insurance claim that low-income households and minorities are adversely affected by insurance scoring.
Theres plenty more, but overall the trend appears to be to allow insurance scoring with modifications. Although the industry seems largely in favor of insurance scoring, insurers shouldnt forget it is a tool to be applied judiciously. Over-reliance could be bad for a companys reputation, if not its bottom line.
One group insurers need to consider is people with no credit historysome elderly, certain religious sects, and some low-income people, including studentsand the National Conference of Insurance Legislators (NCOIL) model law has offered a few alternatives for this group.
Im reminded of a retired acquaintance who wanted to sign up for cell phone service. This was a guy who had burned his mortgage and always paid his bills. He used his credit card sparingly, preferring to pay in cashold habits die hard. Hes the perfect customerreliable and with meansbut the major service provider refused him. Apparently, his credit history wasnt good enough. Yet that same company, by way of telemarketing, tried to sell him regular phone and long-distance service. Is there something wrong with this picture?
Humans can get complacent when they believe theyve got the slam-dunk technology solution. Another example: A survey by Deloitte Touche Tohmatsu indicates while financial institutions have made progress in deploying technological solutions to protect themselves from external threats, internal attacks on IT systems are surpassing the external. The human factor is a new and growing weakness in the security chain, the survey finds. However, training and awareness [were] at the bottom of the security initiatives list, far behind regulatory compliance and reporting and measurement.
Could it be technology has begun to serve us too efficiently, encouraging a bit of human complacency? Maybe its time to remember if you dont swing your hammer carefully, you might wind up with a fat thumb.
Sharon S. Schwartzman
Editor-in-Chief
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