• Bob Siems

Maryland contemplates forbidding Insurers from looking at credit history

Maryland is planning to put a slight modification into its mandatory insurance scheme. Insurers have apparently based their underwriting criteria on credit rating. (Ability to drive a car safely correlates with percieved likelyhood of paying back borrowed money?) Maryland is considering banning this practice. It tends to give higher rates to people with less money or something.

Yet somehow, WBAL found someone to cast this as a story about evil technology. They have a quote that the core complaint is "big data run amok" because it uses correlations to discover risk even when there is no apparent causation.

I think that the correlation/causation argument is overblown in general. To quote a famous webcomic, "Correlation doesn't imply causation, but it does waggle its eyebrows suggestively and gesture furtively while mouthing 'look over there'." While you always need to keep the difference in mind, the difference does not justify ignoring correlations. Second, why should the insurer care whether it's correlation or causation? Either way it's risk.

Bottom line, I don't see insurers using correlations as a practice worth banning, even though I can see Maryland banning practices that tend to disproportionately place costs on parts of the public that can least afford them.

#MarylandInsuranceAdministration #InsuranceRegulations

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