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A success story for insurance risk results



This post is part of a series sponsored by TransUnion.

Unknown financial disorder puts credit-based points to the test – and it did it brilliantly.

With Coronavirus Aid, Relief and Economic Security (CARES)) By acting in 2020, the US Congress acted to ensure that Americans who were in financial distress due to the effects of the pandemic could protect their credit from economic conditions beyond their control. The CARES Act helped protect the most needy during an unprecedented crisis.

Providing credit information accommodation to consumers in financial difficulties is not a new practice. During covid-19, data providers used long-term housing methods to provide relief to consumers facing financial difficulties from events such as catastrophic weather events and other declared emergencies.

But the combination of these protections, the pandemic itself and its impact on the economy raised all concerns in the insurance industry . An important variable in the insurance guarantee process is a credit-based insurance risk score (hereinafter referred to as insurance risk score. It is not the same as a credit score. Although it is based on much of the same data, it is designed to predict insurance losses, not financial ability Nevertheless, these points are derived from much of the same data source as traditional credit ratings and are subject to some of the same rules.

The overarching question was: DO YOU CARE enough hindsight to know that both the CARES Act and insurance risk scores worked as intended during the worst phases of the covid-1

9 pandemic and associated economic downturn.

Overall, most consumers who experienced difficulties due to lost or reduced employment without debt secure accommodation with lenders so that their credit itworthiness was not negatively affected. Separately, but at the same time, insurance risk scores remained stable and predictable. Let's look at a few examples to see how this worked in practice.

A study in stability

TransUnion CreditVision® Auto, an insurance risk score for car insurance, provides a strong example of this stability. Figure 1 compares the monthly median score during the course of 2020 and into 2021 for the total credit-active population. A higher score indicates a lower insurance risk.

Figure 1. CreditVision Auto Insurance Score monthly median score.

 Media CreditVigurance Insurance Insurance17] score.

As you can see, this score showed strong stability throughout 2020 and into 2021. This stability reflects an underlying stability in the economy, dampened by the recovery after lockdown and the stimulus provided by the CARES Act and other legislative measures. [19659004] As of September 30, 2021, the number of consumers with at least one housing without student loans has decreased by 67% since the peak of housing activity in the second quarter of 2020. TransUnion research has shown that the vast majority of consumers continued to make payments on housing accounts, and that 89% of the dwellings have now been removed. The CARES Act's credit disclosure provisions helped to maintain the stability of insurance risk scores, so that insurance providers and consumers were not adversely affected by the initial severe pandemic economic shock.

CARES Act's consumer protection continues to apply after a residence ceases. In June 2020, the Consumer Financial Protection Bureau (CFPB) published the CARES Act consumer reporting guide, which describes protection after housing. The guidance specified that a consumer who had a "current" account status when a home was stated cannot be reported as due based on the housing covered period when the home ends, provided that payments were not required, or that the consumer met any payment requirements under the home. In addition, the housing cover period can not be used to promote, or accelerate, a crime when housing ends.

Where we stand, and a look ahead

The credit accommodations built into the CARES Act were unparalleled in scope, but not natura: Legislative accommodation is not new, and we can expect it to remain important in the future. The last 18 months have shown us that insurers can trust the integrity of insurance risk points even in a regulatory environment when certain derogatory information cannot be taken into account.

There are still concerns among the public and in the regulatory area about the fairness of using credit-based scoring for insurance guarantee purposes. In future blogs, we will take a look at fairness tests and the need for the industry to adapt to best practices, and see how insurance companies can share these positive messages with their public and government partners.

How to learn more [19659019] If you have questions about TransUnion, visit transunion.com/industry/insurance or send an email to inssupt@transunion.com.

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