We represent about 200 insurers, including most of the major insurance carriers in the Commonwealth. I know you're a little bit pressed for time, and I thought maybe I could help clarify a couple of things I heard discussed today.
Councilman Rizzo wanted to know where the piece in Act 93 went of taking someone's car for not having insurance. We removed it; we lobbied very strongly to remove it. 108 5/14/02 LAW & GOV'T - RES. 020174 The reason we did that is because the state doesn't have -- and, believe me, doesn't want to try to get -- a system at a coordinated state level to try to keep up-to-date records on every driver in the state with respect to insurance. So, consequently, there's no way for an officer to check that right now, and there won't be for a number of years unless you want to pay for him to have a unit in his car and want to pay for a system at Harrisburg to track all of that for 200 companies that write auto insurance. Florida has been trying to do it for ten years. They spent upwards of to $30 million and 15 are no closer to working the bugs out of the system 16 than they were when they started. You have to have 17 the vehicle identification number in there, which is 18 13 to 14 digits, and mistakes are continual. The 19 records of the state -- it's an absolute mess. 20 Consequently, the -- and to answer 21 another question, the way the thing works right now 22 is, my companies report you as having lapsed your 23 insurance if within the first 180 days you have a 24 policy, the theory is, if you've been carrying 25 insurance for ten years, you're not going to go 109 5/14/02 LAW & GOV'T - RES. 020174 without insurance. We're going to report that. We worked out a deal with PennDOT. So we report cancellations with 180 days, and then they go back and they cancel your registration, and that's when you would pick them up under your Live Stop Program, just to explain that, 'cause it came up earlier.
So you're saying that as a practical matter, there is no way that a police officer can determine that the insurance has lapsed for any reason, that once there's for identification that insurance has been bought, say, within the last year, the police officer has to assume that the insurance is in order.
Okay, we can understand that. That makes clear the reasons for the difficulties that the Managing Director was coping with.
Okay. Secondly, with respect to mileage-based rates, let me say two things: First of all, this is really not a rating issue as much as it is a purchase technique, which 110 5/14/02 LAW & GOV'T - RES. 020174 presents a lot of promise. Insurers like choice. We have a competitive market in the Commonwealth, as someone said, and --
Before he begins on the mile by rate, the rates in Philadelphia, and there have been statements made by a lot of folks that Philadelphia is redlined by the insurance companies in terms of auto insurance, and the rates in Philadelphia are extremely high compared to other parts of the Commonwealth. And this charge -- and in the poorer neighborhoods, because we have a greater degree and a higher percentage of poor people in Philadelphia than in other areas of the Commonwealth. It really almost makes it -- the current rate structure in Philadelphia almost makes it impossible for poor people to have insurance and eat or pay rent; and they have to choose, in many instances. That's why we're having these hearings in terms of a new structure in order to make insurance... The problem is the insurance industry and the way they deal with the County of Philadelphia. And I think there has to be reform at that level in 111 5/14/02 LAW & GOV'T - RES. 020174 order to make cities like Philadelphia in this Commonwealth a more fairer structure and allow poor people in this city to be able to own an automobile. The jobs are right now are in the suburbs, and they come into the City to recruit workers, and many times, they go into poor neighborhoods, and they just cannot afford that insurance for that car in order to be able to -- so many of them are forced to drive illegally now. Now, how do we deal with that? I think the issue is the way the insurance structure of this Commonwealth is structured and the way that it is applied in Philadelphia. I think if we had a fairer system, I don't think we would be having this hearing.
Because the basic problem, Councilman Ortiz, is that it costs so much more here rather than in other parts of the state to sell and service insurance policies. The loss experience here is horrific. It has to do with -- as every agency says, whether it's the Philadelphia Inquirer or the Philadelphia 112 5/14/02 LAW & GOV'T - RES. 020174 Magazine, go back for years, and every so often, they go through these gyrations of restudying this problem, and they always come to the same conclusion: We have virtually an out-of-control reparations system. The loss costs are extremely high here, you know, auto repairs cost more, medical care costs more. Philadelphians are three or four times as likely per accident to make a claim for personal injury than other parts of the State. I don't know why that is. I can leave it to your imaginations. The recoveries here in each of those auto accidents is as much as twice elsewhere in the state, and you wonder why it costs more to buy insurance here.
Excuse me. You're blaming the litigation that takes place?
But that's -- what was 113 5/14/02 LAW & GOV'T - RES. 020174 your whole answer. I mean, your answer, in essence, says that people litigate in Philadelphia, that they claim more per accident, and they go to court obviously. Is that --
They don't litigate in other parts of the state; they don't litigate in Pittsburgh, they don't litigate in --
Certainly they litigate, but they litigate many fewer claims on a per-property damage-incident basis, and the recoveries and the costs of backing up your policyholder on those claims are significantly less, but --
Do you have substantiation for that? I'd like to see that data that you have.
I'd like you to 114 5/14/02 LAW & GOV'T - RES. 020174 provide that to this committee.
I'd be happy to provide that. We've provided that in many forums and, indeed, wanted to go over and talk to the Mayor's task force about it, and actually did present a fair amount of data to the Mayor's task force and suggested that basically, although mileage-based rates is interesting from a purchase proposition, which we don't necessarily oppose, I don't think, but if the Council wants to merely recommend to the State that they enable insurers to offer insurance on a mileage-based rate, I don't think the Insurance Federation's going to oppose you. I don't know what the Insurance Department will think; that's another issue. But I don't think that would be something we'd object to. In fact, Progressive, who is a member of the Federation and who I talked to about this, is very interested in trying this system out in Texas. I'd only make two points and then I'll get off and let you hear from some of the other folks that you have that want to testify today. You need to understand that the mileage- based piece of this is not really something you're 115 5/14/02 LAW & GOV'T - RES. 020174 doing rates with. The rates that progressive used in Texas developed -- in other words, the per-mile rate was based on traditional rating criteria; it wasn't based on just miles alone. Miles alone is a terrible way to base rates. It remains to this day the most significant factor in the cost of servicing your auto insurance is where the car's garaged. It accounts for 60 or 70 percent of the predictability of how much cost you're going to have. So that's one thing that we -- And, Councilwoman Tasco, when I received your resolution, I wasn't sure what proposition you were putting forward. So if you do read my testimony, you may see me spending time in talking that as a rate-based issue. As a purchasing issue, this is a very interesting proposition. Unfortunately -- and Professor Butler has already alluded to this -- the problem is that the proprietary technology and the GPF system that's required to validate the mileage on an ongoing basis, that was all paid for down there, and it wasn't paid for by the policyholders. When they get around to calculating whether companies can make any money on this, they're 116 5/14/02 LAW & GOV'T - RES. 020174 going to have to include whatever cost that is, and that wasn't done in Texas. So while the Texas purchasing plan did indeed yield a lot of savings, I don't believe that it was net of those other costs, and that remains a technological obstacle. But insurers like choice. Progressive, after all, was the one who went ahead and tried it in Texas. And they're not done experimenting with it. Again, at the end of my testimony, I --
You talked about the rate is based on where your car is garaged. There are people who live in Bucks County and Montgomery County. And I think in your testimony, you referred to risk of driving down Roosevelt Boulevard. And if where someone drives is indeed the greatest predictor of risk, then why is a driver who garages her car in Bucks County charged significantly lower rates than a driver who garages her car in the Northeast, where both drivers commute down the Boulevard each day and have a similar age, income, education, and other characteristics, but both travel down the Boulevard?
But one lives in 117 5/14/02 LAW & GOV'T - RES. 020174 Bucks County and one lives in Philadelphia.
I don't know that I can explain any particular factual context to you, Councilwoman. The statistics are -- as a matter of fact, Progressive, the same company that ran with this in Texas, just came out with some additional findings from a large study they did with their policyholders. Twenty-three percent of accidents occur within a mile of home. Accidents are more than twice as likely to take place one mile from home compared to miles from home, and only percent of reported accidents take place 50 miles from home. Those are the risk numbers; they didn't load them up. I mean, they just can did a survey of the policyholders to find out where those people who had accidents, where it took place. So it's terrifically important where driving goes on. There is no question there are inefficiencies in the current rating system. I wouldn't stand here and tell you there aren't. But I don't think they're the answer to Philadelphia's 118 5/14/02 LAW & GOV'T - RES. 020174 high-cost insurance problem.
Go ahead. STATE SENATOR KITCHEN: Doesn't profit have something to do with how much on premium goes toward the percentage for advertising, a percentage for profit, and a percentage for whatever else? Now, profit comes in here somewhere, and it would seem that someone who would be going just to work for the purpose and coming back home, and senior citizens, a policy based on the per-mileage would seem to be curtailed to somebody of a low income like senior citizens, as opposed to someone else with a more affluent income who would do much more driving, which would lead us to say, it could work for one population, except for the others, except for the profit. And I do think that if you're paying more in certain neighborhoods, of course, with no 20 fender-benders, as it was stated earlier, okay, some money is made there. You looking at poor people with a less-mileage car, the car doesn't cost as much. It do look like those factors could be taken into account, that you're not talking about the newer cars, and you would not be talking about people, say, 119 5/14/02 LAW & GOV'T - RES. 020174 driving all the time. And it is some issue here in terms of profit, though.
Well, Senator Kitchen, I don't have any quarrel with what you said, but I do think that there -- as long as we have a private- industry-based automobile insurance carrier is out there, there's going to be a piece of profit built into everybody's rates. The companies are not in business to lose money and, as Professor Butler said, if they lose money too long, we end up with a bankrupt insurer, and now all of the rest of the insurers pick it up under our pooling system. So there's going to be an element of profit worked in. If you're telling me that this has the promise of being a purchasing system that can help the low-mileage driver, I'd have to be awful dumb to deny that. But, again, I don't necessarily think it's the answer to Philadelphia's high insurance rate problem. STATE SENATOR KITCHEN: Well, how about in the case of -- I know it's set up to make up a profit; I'm not saying that. But what about in the case of, say, for 120 5/14/02 LAW & GOV'T - RES. 020174 instance, with the whole prescription drug issue that we -- and we were fighting that for several years, and for several years, we asked the big manufacturing companies to show some responsibility toward seniors and low income, and they came up with a limited prescription drug, which we don't know yet if it will help, but it appears that it would for people of certain incomes pay a certain percent a month and drugs can't -- they can't purchase drugs at a discount. What I'm saying is, would you be willing with us to look at some options here for people? because these folks evidently is falling within a certain income, and we are looking at people who will lose their automobile or, you know, be in serious trouble. It's obvious they can't pay into the regular system.
Well, Senator Kitchen, you know our reputation in the legislature. We'll talk with you anytime about any proposal you have. In the end, I don't know whether we will necessarily back it, 'cause when you're talking about subsidies -- now, Professor Butler doesn't like some subsidies, and as a rule, when it comes to actuarial 121 5/14/02 LAW & GOV'T - RES. 020174 operation of insurance, we generally don't like subsidies either because it puts incentives in the wrong place, and we would be happy to entertain any proposal. But I don't know that actually improving the economic welfare is something you really want to work into your insurance system, because he feels that -- apparently, some of the environmental folks feel that the present system either subsidizes or maybe, I should say, encourages excess driving. I don't honestly know whether that's true or not. But the insurance system really operates best when costs are allocated as accurately as possible. And this system has promise of doing some good allocation; it's just that I don't think it's feasible right now from what I understand from my companies. STATE SENATOR KITCHEN: Thank you.
Thank you, Mr. Chairman. Good afternoon, Mr. Doubman. I know I didn't hear all of your testimony, so if I ask a redundant question, please let me know, and I'll read 122 5/14/02 LAW & GOV'T - RES. 020174 the answer in the notes of testimony. Let me just ask a little bit of background. The Insurance Federation of Pennsylvania, you represent all of the insurance companies?
No. We'd like to represent them all, Councilman, but we actually represent about 200. And it's only the commercial companies; we don't represent the blues since they are, in theory, anyway, not for profit. We represent the commercial side on all lines. We represent life insurers, health insurers, auto, you know, commercial insurers, Worker's Comp. and med mal insurers -- at least one of them, anyway.
Okay. So -- and you said you don't represent all of them. Are there -- 123 5/14/02 LAW & GOV'T - RES. 020174 with the exception of the blues, are there companies that you don't represent?
Yeah. We apparently have -- something went on between us and Harleysville some years ago, and we've been trying like heck for three years to get 'em back into the fold. So there are some companies out there, and some substantial companies, that we don't represent. Other companies take the position that they want to let national trades try to work on the local level, and they don't choose to enter our organization. So there are some companies out there, and some substantial ones, that don't belong.
Okay. Now, I'd like to ask you some questions about rates. Why is it that it appears, either in perception or in fact, that there is a difference in rates based on where you live, whether in Philadelphia County or in other county of the Commonwealth or from one neighborhood to another in the City of Philadelphia? Is that the case?
Well, how to answer the question. We don't have a unified rating system across the state. 124 5/14/02 LAW & GOV'T - RES. 020174
Well, you could. We don't have it because the law doesn't provide for it.
Well, I could have hair but I don't. Why don't you have it?
Well, it's really the same answer, I mean, because the legislature didn't set it up that way.
So how is it set up? You know, I'm not in the legislature.
It's set up in rating territories. Philadelphia County is probably the largest and it's a rating territory on its own. I used to have a piece with me that has it broken down, but there's maybe, I'd say, maybe 40 rating territories. You're really getting me into an area where I'm far from an expert. But in any event, the costs are gathered for those different rating territories based on where insured vehicles are garaged, as far as I understand it.
It doesn't mean that they have to physically have a garage or --
You speak very technically and I should be careful. So that, for example, if the person from Bucks County that we heard about driving down the Boulevard has an accident in Philadelphia, and we couldn't get Mayor Rendell to get this straight, that accident is not charged to Philadelphia; it's charged to Bucks County, where he lives. It's charged to his home, the driver's home, where the vehicle is kept or garaged.
Just a point of order. You said the accident is charged to the person's home?
Correct, to where the vehicle is kept, not where it's driven.
But if they have an 126 5/14/02 LAW & GOV'T - RES. 020174 accident in Philadelphia, the statistic is tied to Philadelphia.
No, it isn't. That's just the point I made, Councilwoman. The accident is charged to where the policy is located, where the vehicle is located. If it's a person who lives in Bucks, it's charged to whatever appropriate rating area within Bucks is.
Well, when you say "charged to," for insurance company purposes, you're saying that it was a Bucks County person who had an accident somewhere, but they live in Bucks County, and so it is, quote/unquote, charged back to Bucks County?
Right, for purposes -- I understand for purposes of insurance company rate-making that it's taken into account as a cost of servicing a Bucks County. It has nothing to do with Philadelphia.
Well, then let me try to understand this. Are you saying that the insurance companies, when they try to figure out -- what did you call it, "rating territory"? What did 127 5/14/02 LAW & GOV'T - RES. 020174 you call that, what was that term?
Well, they don't figure them out, they're set. But whatever rating territory that's where I said it would be charged to their home and --
Let me make sure I understand this. You're saying that the State Department of Insurance, or the Insurance Department, sets the rates for the different rating territories?
And they approve the rates which auto insurance companies file with them.
All right. So that's 128 5/14/02 LAW & GOV'T - RES. 020174 a little different. They don't set the rates; they approve what the companies apply for.
Well, the companies propose the rates, and it's like the utility commission work, the department argues with them are or tells them they're too high or too low or --
And so how do they determine what the rates should be in Philadelphia County versus Lackawanna County? How is that determined?
A general overview of the process is that the company determines a loss cost; in other words, what it costs to service policies in that county. And then they go --
Well, based on gathering data of what it costs to service the policies in that rating territory. Now, some of the companies don't do that for themselves --
I'm sorry, I don't mean to interrupt you, but you have to understand, all of my knowledge about insurance is a function of getting a bill in the mail and paying it. It's 129 5/14/02 LAW & GOV'T - RES. 020174 everything I know about insurance.
So you'll have to go slow with me. You said "the cost to service the policies," is that the term you used?
It means everything from what you have to pay to get cars repaired, what you pay to rent a car so the person can have it, what you pay your people --
The cost of the paper, the cost of your rent on your building, whatever.
The cost of the accidents. I suppose the number of accident is technically 130 5/14/02 LAW & GOV'T - RES. 020174 irrelevant except insofar as it costs you something to pay out the damages on those accidents, to the extent that you're contractually obligated to do so. Once that is done -- and what I was going to tell you is -- every company is not big enough to do that for itself. Some companies subscribe to an insurance like the Insurance Services Office, where the data is accumulated by a statistical agent.
The name is not important. Just say there are some statistical agents around who do that work typically for companies that are small enough that they don't gather all of their own data. State Farm and AllState, they have their own data and their own actuaries, but that work can be contracted out. But, in any event, the first step is filing the loss costs for the different territories. Then the second step is, the company comes in with a proposal to adjust its rates. It says what it wants in profit, it says what it expects to happen, whether we're going to see a big increase in this cost or that cost. If the price of steel 131 5/14/02 LAW & GOV'T - RES. 020174 doubled, I assume a company is going to want to include something additional for the cost of auto repairs. If the auto repair shops succeed in their campaign to have every vehicle replaced with brand-new parts from Detroit, buy General Motors stock, and your insurance rates are going to go up.
Well, so, let me understand. So, again, is it true that there are different insurance rates between Philadelphia and the counties around us?
'Cause we don't have one big rating territory here in Pennsylvania.
Well, what's the difference in cost between fixing a car, paying employees, and all of the items that you mentioned, the elements that you mentioned, between Philadelphia and Montgomery County?
Well, I was getting into that a little bit. The claiming behavior --
Well, I'll get into it as 132 5/14/02 LAW & GOV'T - RES. 020174 far as I'm comfortable making representations to Council, and I'll offer to supply anything additional that you need.
But the claiming behavior in Philadelphia is significantly different than in other counties -- not so much the suburbs, but clearly different than the rural counties.
People in the suburbs and the rural counties don't make claims; they just let bygones be bygones and say, Oh, life is wonderful and --
What I said is that they make less claims, and the claims they do make are less costly to settle.
Less claims on a per -- generally the way these things are ranked is, you 133 5/14/02 LAW & GOV'T - RES. 020174 look at how many property damage incidents you have, and then you see how many bodily-injury claims were made as a percentage of that, okay? So in terms of frequency, Philadelphia is the highest in the state by far. In terms of the cost of settling those claims, Philadelphia is the highest in the State by far. So those costs have to be included in the cost of servicing Philadelphia policies.
Earlier you said, in response to another question, that something was not -- and I forget what the something was -- was not the answer to Philadelphia's high insurance rate problem.
Yes. I believe that a mileage-based rate purchasing system --
I didn't know when I wrote tell me whether we were talking about a rating system or a purchasing system. I believe Dr. Butler's proposal has devolved mostly into a purchasing technique.
Which shows a lot of 134 5/14/02 LAW & GOV'T - RES. 020174 promise.
I don't believe that that system, no matter what formulation we wind up getting at here, is the answer to Philadelphia's high insurance rates.
Which now I want to ask you: What is the answer to Philadelphia's high insurance rates?
There are a lot of answer to it, and we've put forward a lot of those answers and suggestions we have. I can tell you about several that we've already worked on. As an example, the Insurance Federation raised about $700,000 and had designed for the Police Department and installed at the Police Department a system for getting accident reports on line. This will save our companies money, it saves the middle man. It will enable to us service policies and settle claims quickly, and should result in some efficiencies. Our company annually raises among itself assessments on the order of $8 million a year, $2 million of which is granted to the District 135 5/14/02 LAW & GOV'T - RES. 020174 Attorney's Office here in an attempt to discourage insurance fraud. We believe that that's a good investment, we believe that that helps keep down the insurance fraud.
Do you know how many people were prosecuted last year for that?
I don't. I don't have that figure in front of me. They've been doing a good job. I don't know how much -- I can't tell you -- even if I knew how many people have been prosecuted, I don't know that I can put a dollar amount on what's been saved, but it's important that many people know that law enforcement is out there and interested.
Well, I understand that but, I mean, if you're putting up --
The insurance fraud aspect of that, is it because they live in Philadelphia and they -- and the insured, let's say, 136 5/14/02 LAW & GOV'T - RES. 020174 in Montgomery County or in New Jersey or they live -- they have New Jersey plates but they live in Philadelphia?
I don't think they've prosecuted any of those cases, Councilman. That is insurance fraud, but they don't prosecute those cases, I don't think.
I guess all I was going to say was, I mean, if you're putting up a total of $8 million, you said, 2 million of which is coming to Philadelphia?
Okay. I just thought that -- I mean, for your $2 million, you might want to know what you're getting out of it.
Oh, we do. I just don't have the number in front of me. And I didn't mean to stop with those two programs; I just wanted to cite what we've done cooperatively with the City. 137 5/14/02 LAW & GOV'T - RES. 020174
Could you provide to the Chair the statistical analysis over the past three years of what the program has produced.
I'd be delighted to have the annual reports of the Insurance Fraud Prevention Authority sent over to Councilwoman Tasco, and we'll also --
And I didn't mean to interrupt you. You were listing all of the ways that the solution to high insurance rates could be solved in Philadelphia. What were the rest of them?
No, I wasn't -- I wouldn't dream of holding you here to list all of the possible ways. Another way, however, is that there are many, many, many bills put in the legislature that would raise your initial rates. For example, the trial bar wants to increase the amount of insurance you have to have. We contest that every year. So far we've been successful in keeping it down. 138 5/14/02 LAW & GOV'T - RES. 020174 We fight battles on the regulatory scene. The body shops want to have you fix all vehicles with Detroit-made parts; it has a terrific profit margin on those parts. We struggle against that. That's basically what we do.
Why don't I suggest this: If you could also provide from the Federation's perspective a listing of proposals that would help reduce costs, insurance premium costs in Philadelphia, to the chair, that would be greatly appreciated. Let me just ask you a couple of other questions. I'm sure my colleagues have questions of their own. Now, do you think that my driving ability is affected by my income, my race, or my zip code?
I don't think your driving ability is affected by any one of those three.
Are any of those factors a function of what my rates are?
You mean, is your loss predictability governed -- can it be premised on any of those factors?
If that's the 139 5/14/02 LAW & GOV'T - RES. 020174 question you want to answer, yes.
Well, I've created my own question and now I wish I knew the answer. You asked about age?
No, I asked about income level, but we can talk about age.
Don't know anything about income level, don't know anything about income level.
No, no. 18 And, incidentally, it's also not a factor in the insurance credit-scoring proposal that Councilwoman Tasco raised earlier.
Well, the zip code, to the extent that it corresponds with rating territories, as I've said to you, insurance loss cost data is gathered territorially. So if you are in that 140 5/14/02 LAW & GOV'T - RES. 020174 territory and you're going to have a car there, the answer to your question would be yes.
Without regard to what my driving ability is or whether I've had past claims or --
No, I didn't say that. companies take into account -- I believe companies take into account -- they have good driver discounts. For example, if your driving record's bad enough, I think there's companies that will turn you down or cancel you.
Are there some companies that don't write policies in Philadelphia?
Before you answer that, let me note the presence for a long time of Councilwoman Blackwell at this hearing, a member of the committee.
Why don't you repeat the question. 141 5/14/02 LAW & GOV'T - RES. 020174
I'd be glad to if I could remember what the question was. (Laughter.)
Yes. Are there some companies that don't write policies in Philadelphia?
No, I don't think that's true; I think they all write policies in Philadelphia because they all participate in the assigned risk plan. I don't know that -- there may be some that -- I mean, you might have a small mutual policy out in a town in Pittsburgh, and I don't know whether they market a lot here, I don't know whether they have agents here, but I don't think anybody can just say, "I'm not going to write in Philadelphia."
So there's no 24 difference in the rate for a 45-year-old African- American male in Philadelphia versus a non-African- 142 5/14/02 LAW & GOV'T - RES. 020174 American 45-year-old male in Philadelphia?
I don't believe there's any difference, I don't believe there's any difference.
No, I don't think so. First of all, I don't think you would -- I think probably the Constitution prohibiting making a difference, but I don't know that there's any actuarial data from which one could presume there should be a difference. As a matter of fact, we've had a lot of discussion about that today here. I'm not so sure that the driving behavior by the uninsured is any worse than the insured. I've never seen any statistics on that, so I have to plead ignorance.
Lastly, what's the Federation's position on this issue -- there was a story just in our local papers the other day about utilizing credit checks as a way to determine what your auto insurance rates should be. What's the 143 5/14/02 LAW & GOV'T - RES. 020174 connection between the two?
Well, if you can give me one minute, I'll explain some features of that.
Okay. Believe it or not, your driving record is very poorly documented. Do you speed?
I do. Do you always get caught? Very rarely. The fact of the matter is that most elements of people's driving records is very poorly documented. What is well-documented? You got a mortgage; do you pay it on time? The fact of the matter is that the statistics on each one of us is credit dealings and the way we handle credit is extremely well-documented. Not how much money make, but how we handle credit. Do we pay our bills on time? A company in California some years ago, about ten years ago, developed a set of criterion by which they found that the loss -- your risk potential 144 5/14/02 LAW & GOV'T - RES. 020174 can be predicted with a frightening degree of accuracy by taking a certain number of small factors in your credit history to accumulate to an insurance score, and they put together a way to accumulate those numbers so that some companies in their processes began using that insurance score to help put you in a rate or underwrite your insurance.
Mr. Doubman, I mean, that's a very interesting exercise but, I mean, that would be almost like deciding that that just because Mike Schmidt maybe didn't pay some of his bills on time, he couldn't play third base for the Phillies. I mean, what does one have to do with the other? One is an ability; the other one is a responsibility.
Well, what you have to understand, though, is that all of insurance is predicated on estimating what kind of a risk someone is. If you get something that is legally cognizable, and I assume race isn't, if you have some factor that is legally cognizable and we can allocate risks better, we're ail better off if the insurance industry does that.
-- like whether I have any accidents or like whether I file any claims. I mean, if I never touch another person's car ever -- I mean, it's interesting, you know, to ask, do you speed? do you get caught? I mean, you know, I may have parked within, you know, two inches of the curb. I mean, that might be a violation on the Pennsylvania highway test.