A Statistical Analysis of the Relationship Between Credit History and Insurance Losses

At the request of Lt. Governor Bill Ratliff in 2002, the Bureau of Business Research (BBR) examined the relationship between credit history and insurance losses in automobile insurance. With the assistance of the leading automobile insurers in Texas, the BBR research team constructed a database of automobile insurance policies from the first quarter of 1998 that included the following 12 months’ premium and loss history. Using logistic and multiple regression analyses, the research team tested whether the credit score for the named insured on a policy was significantly related to incurred losses for that policy. It was determined that there was a significant relationship.