The Impact of Personal Credit History on Loss Performance in Personal Lines

The key questions that will be addressed in this paper are: 1.) Is there a correlation between credit history and expected personal lines loss performance? 2.) If so, which specific criteria within a credit file are indicative of abnormal loss performance (favorable or unfavorable)? 3.) If this correlation exists, is it merely a proxy, i.e., is the correlation actually due to other characteristics (which may already be underwritten for or against, or rated for)? 4.) As a corollary to 3), are there dependencies between the impact of credit history on loss performance and other policyholder characteristics or rating variables? 5.) What are the ramifications of utilizing such data for underwriting and/or ratemaking?