Insurance Transparency Project

I-Fans,

A quick one today about a case now before the U.S. Supreme Court in which two insurers are defending their decision not to tell customers about their-less-than perfect credit, the Insurance Journal tells us.

The insurers, Geico and Safeco Corp., are appealing a 9th Circuit ruling requiring them to alert nearly all their customers that they weren’t getting the best auto rates because their credit scores weren’t the highest. The appeals court had ruled that not telling customers was a violation of the Fair Credit Reporting Act of 1970.

“The case casts a spotlight on the business world’s vast credit reporting system, which has compiled files on 200 million Americans.”

I don’t know whether insurers should be required to make this disclosure. The court seems skeptical. Justice Roberts noted that customers are already entitled to a free copy of their credit report. Justice Breyer wondered whether the notification, expensive as it would be, would “go right in the wastebasket.”
To me, the case is another reminder of the asymmetry of information in the insurance market. Sellers have near limitless access to buyers’ past financial, or credit, “performance.” Buyers, as I’ve said, don’t know the first thing about sellers, namely, who is likelier to pay claims? How can the market reward good actors, punish the bad and squeeze out the inefficient?

Sorry no yucks today; War Eagle’s under the weather. Thanks for all the mail lately. I’ll be posting it soon (anonymously) on the site.

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(1) A unit of Berkshire Hathaway Inc. (ticker: BRK-B)

(2) Based in Seattle (SAF)

First in a series of amazing Katrina photos bouncing around the web:

Note from Dean: I took it down; my bad. The source of those photos isn’t known. See ITP Corrections.