Which statement supports the proponent view that credit scores are necessary in underwriting or rating?

• A. They are predictive of future claim experience
• B. They guarantee actuarial fairness
• C. They remove all risk
• D. They require no data

Answer: (A)

The main idea is that these scores are used because they have predictive power for future losses. Credit-based insurance scores reflect a consumer’s credit history and financial behavior, which studies show tends to correlate with riskier patterns or instability that can lead to more frequent or larger claims. That predictive relationship is why proponents argue credit scores are a useful, necessary tool in underwriting and pricing—the score helps distinguish risk levels and set premiums accordingly. They don’t guarantee actuarial fairness, they don’t remove all risk, and they aren’t free of data needs; they are one data point among many that improve risk assessment.