Microsoft Power BI Consulting Services in Qatar use Big Data Causing Insurance Actuaries to Move Away from using Credit Scores

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Insurance companies have spent decades refining their actuarial models. In the 1990s, they began to use credit scores to assess customer risk and set premiums accordingly. Laws that allow the use of credit scores with insurance companies vary from state to state. However, about 95% of auto insurance companies scores credit in their actuarial algorithms.

Understanding the Consumer Credit Risks

Credit scores were developed long before the era of Big Data Microsoft Power BI Consulting Services in Qatar. Since brands can only assess a limited amount of data at the same time, they need to intensify the creditworthiness of consumers in one form.

While credit scores have proven their value over the years, they provide a gradual picture of the actual credit risk of customers. Here are some problems with the traditional credit score system.

·         Because of the way credit ratings are assessed, a small or one-time issue can significantly bias the model against an individual with a credit value. For example, an individual who has suffered a serious medical emergency can face severe medical debts, Hadoop Consulting Services in Qatar which will negatively affect his or her grades for years to come. This effect may have little impact on real credit risk.

·         Nearly 30% of the credit score model depends on their current credit lines. Some experts have criticized this model, because it may actually be biased against the most trustworthy individuals. These people may get lower credit scores because they do not have a credit card or a loan. This may be an indication that they are being punished because they are being saved and living within their means.

This model is obviously not perfect for financial lenders, credit card companies and retailers who need to issue credit lines. Even less reliable for insurance providers. The Microsoft Power BI Consulting Services in Qatar fact that a person has never received a credit card or has a large outstanding debt by a decade has little to do with its ability to pay premiums or prove that it is responsible as a driver or home.

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