Professors study link between biology, credit score and risk

Two University of Texas professors are researching links between people’s biological makeup, financial risk-taking and propensity to crash cars.

Patrick Brockett, a professor of risk management and insurance in Auistin, said the research is intended to explain credit scoring, or the practice of factoring a driver’s credit history into insurance rates.

“These biological and psychological correlates are in some way predictors of your financial risk-taking and predictors of how you will drive,” Brockett said. “I’m really trying to understand why this relationship exists. I’m not trying to say how the insurance companies should use this.” Most of the top 40 auto insurers in Texas use credit scoring, and those companies write 67 percent of the state’s auto policies, said Jim Hurley, spokesman for the Texas Department of Insurance.

Supporters of the practice said insurers are best able to predict a person’s risk as a driver, and set rates accordingly, by factoring portions of their credit history with other variables such as driving record, age and car model.

Typically a person with a poor credit score pays a higher rate, while a person with a good credit score pays a lower rate.

“Our goal is to charge less to someone who has fewer accidents, and charge more to someone who has more accidents,” said Jonathan Klein, Texas product manager for Progressive auto insurance company.

Opponents of credit scoring argued that it’s an inconsistent and inaccurate method of determining whether a policyholder is likely to file a claim.

Dan Lambe, director of the consumer research and advocacy group Texas Watch, said insurers are rejecting new drivers and setting unfair rates based on unfair methods.

“With some insurance companies, it’s good to have five credit cards, while another may penalize you for having more than two,” Lambe said. “It’s a very inexact science, and in our opinion that’s not good public policy.”

Brockett has crunched the numbers on credit scoring in another study, and he is convinced that it is a useful tool.

He said that study, which was commissioned by the Legislature in 2003, shows credit history relates to future insurance claims and that the same predictions are not accounted for in other variables, such as a person’s driving record.

Now, with professor Linda Golden, he wants to explore why credit scoring works.

“One might postulate that the reason there is a relationship between credit scoring and accident losses is because of psychological and biological variables that are related to both,” Brockett said.

Earlier studies have shown links between biological traits and auto accidents, and between biological traits and financial risk-taking, Brockett said.

For example, people with low levels of the blood chemical Dopamine Beta-Hydroxylase are more inclined to be financial risk-takers. And people with higher levels of the hormone testosterone have been shown to be higher risk-takers.

But nobody has proven how biology links financial risk-taking and risky driving.

“Someone who is a high risk-taker will have a certain biological chemistry, which will also predispose them to have more frequent auto accidents,” Brockett said.

Brockett said he and Golden’s research is focused on culling information from previous studies to develop their theory. Then the study could move to human subjects.

The team plans to publish a paper on their results, and Brockett expects some controversy.

“Science is science,” he said.