Empirical Evidence on the Use of Credit Scoring for Predicting Insurance Losses with Psycho-social and Biochemical Explanations

An important development in personal lines of insurance in the United States is the use of credit history data for insurance risk classification to predict losses. This research presents the results of collaboration with industry conducted by a university at the request of its state legislature. The purpose was to see the viability and validity of the use of credit scoring to predict insurance losses given its controversial nature and criticism as redundant of other predictive variables currently used. Working with industry and government, this study analyzed more than 175,000 policyholders’ information for the relationship between credit score and claims. Credit scores were significantly related to incurred losses, evidencing both statistical and practical significance. We investigate whether the revealed relationship between credit score and incurred losses was explainable by overlap with existing underwriting variables or whether the credit score adds new information about losses not contained in existing underwriting variables. The results show that credit scores contain significant information not already incorporated into other traditional rating variables (e.g., age, sex, driving history). We discuss how sensation seeking and self-control theory provide a partial explanation of why credit scoring works (the psycho-social perspective). This article also presents an overview of biological and chemical correlates of risk taking that helps explain why knowing risk-taking behavior in one realm (e.g., risky financial behavior and poor credit history) transits to predicting risk-taking behavior in other realms (e.g., automobile insurance incurred losses). Additional research is needed to advance new nontraditional loss prediction variables from social media consumer information to using information provided by technological advances. The evolving and dynamic nature of the insurance marketplace makes it imperative that professionals continue to evolve predictive variables and for academics to assist with understanding the whys of the relationships through theory development.IC2 Institut

Fertility of N'dama and Bunaji cattle to artificial insemination following oestrus synchronization with PRID and PGF2a in the hot humid zone of Nigeria

A study was undertaken to determine the effectiveness of a progesterone-releasing intravaginal device (PRID) and prostaglandin F2 alpha (PGF2a) in synchronizing oestrus in N'dama and Bunaji cows and heifers and the fertility following artificial insemination at the synchronized oestrus. A total of 116 cows and heifers (58 N'dama and 58 Bunaji) were used in two separate trials. In the first trial, oestrus was synchronized using a PRID, which was inserted for 12 days; in the second trial, oestrus was synchronized by giving two injections of PGF2a 13 days apart. Only animals that did not respond to the first injection were given the second injection. At the end of each treatment period, the animals were observed for oestrus for 7 days and inseminated approximately 12 h following detection of oestrus. Standing to be mounted was the single criterion used to judge an animal to have been in oestrus. PGF2a and PRID were both effective in synchronizing oestrus in N'dama and Bunaji cows and heifers. The respective oestrus response rates, pregnancy rate and conception rates for PRID and PGF2a were 85.7%, 53.6% and 62.5% for PRID, and 91.7%, 68.3% and 74.6% for PGF2a. N'dama cattle showed significantly (p<0.05) better oestrus response rate, pregnancy rate and conception rate than Bunaji cattle following both PRID and PGF2a treatments. The pregnancy rate and conception rate following PGF2a treatment were better (p<0.05) than for PRID, although the oestrus response rate did not differ. It is concluded that both PRID and PGF2a are effective in synchronizing oestrus in N'dama and Bunaji cattle in the hot humid zone of Nigeria and the fertility to artificial insemination at the synchronized oestrus was normal and acceptable. Thus, PRID and PGF2a can effectively be used in intensive breeding programmes for the rapid multiplication and distribution of both cattle breeds, especially the N'dama, which is a unique and beneficial animal genetic resource for the tsetse infested hot humid zone of Nigeria