Bankruptcy and insurance

markg138

Why is there a focus on bankruptcy for insurance.  If you default on your insurance they cancel your policy so why is it a problem, especially if you are willing to pay up front

user1977

Presumably because people with money problems are more likely to make fraudulent claims.

Aretnap

user1977 said:

Presumably because people with money problems are more likely to make fraudulent claims.

Or simply that credit history is correlated with all sorts of other socio-economic factors, which are also correlated with high accident/claims rates. Doesn't have to be anything to do with fraud.

Many ratings factors are thinly disguised markers for social class. Occupation and postcode are the two most obvious ones, but credit history/CCJs/bankruptcy fits into that general category as well.

dunstonh

markg138 said:

Why is there a focus on bankruptcy for insurance.  If you default on your insurance they cancel your policy so why is it a problem, especially if you are willing to pay up front

For many insurances where you pay monthly, it is done under a credit agreement.   So, bankruptcy is a key issue.

For those paying up front it is less of an issue but still involves risks as a bankrupt has a worse track record for reliability than someone that hasnt been bankrupt.     Those that have been bankrupt have often cost insurers money.