According to Kucera, what is the effect on premiums if credit-based insurance scores are not used?

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Multiple Choice

According to Kucera, what is the effect on premiums if credit-based insurance scores are not used?

Credit-based insurance scores help price risk more precisely by linking losses to a driver’s credit-driven risk profile. When those scores aren’t used, the pricing signal becomes less refined, so the overall pool of premiums doesn’t automatically go down. Instead, the way charges are allocated among policyholders shifts. In other words, the total amount collected from premiums stays about the same, but who pays more and who pays less changes because the predictive power of credit scores is removed. This redistribution is the key idea behind the answer.

Credit-based insurance scores help price risk more precisely by linking losses to a driver’s credit-driven risk profile. When those scores aren’t used, the pricing signal becomes less refined, so the overall pool of premiums doesn’t automatically go down. Instead, the way charges are allocated among policyholders shifts. In other words, the total amount collected from premiums stays about the same, but who pays more and who pays less changes because the predictive power of credit scores is removed. This redistribution is the key idea behind the answer.

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