Jill Insley: Credit scores mark us all as losers

Jill Insley: Credit scores mark us all as losers

Cherry-picking is a fact of life among insurers, and many of you probably think there's nothing wrong in it. No doubt it works in favour of many Observer readers, those who take care of their possessions, drive carefully within the law, are aged between 35 and 55, and live in the 'right' postcodes. Anyone meeting these criteria will already be paying less for their contents, buildings and car insurance.

Now people who earn good salaries, are never overdrawn and don't miss payments to creditors may be about to join the select list if Barclays Insurance gets its way.

Insurers are - except for the few remaining mutuals - commercial entities designed to make profits for their shareholders. It's unrealistic to hope that they will not adopt any underwriting practices that allow them to reduce the cost of claims and increase their margins.

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But you have to wonder where it will stop. In the Eighties and early Nineties it was very difficult for any gay man to buy life insurance because of the perceived high risk of him contracting HIV and Aids. Now we face the prospect of thousands of homeowners being unable to buy house insurance because they live in high-risk flood areas. Young men are charged so much for car insurance, many are deterred from buying it, leaving the rest of us to pick up the bill if they crash.

Insurers have so far agreed to a voluntary moratorium on using the results of genetic tests to underwrite life cover, but as more tests become available one suspects that they will eventually demand access to any information available to applicants.

While credit scoring has worked well for US insurers, it's easy to see how the process could easily produce an insurance underclass. This process has already produced a debt underclass: American pressure group Fair Finance Watch is leading a campaign against HSBC, claiming the bank confines a disproportionate number of black Americans to high-interest, 'subprime' mortgages designed for higher-risk borrowers. The group cites figures showing that black borrowers are five times more likely than whites to be given only high-interest mortgages and 2.5 times more likely to be rejected by the bank.

HSBC denies this, and says the figures reflect the realities of US society in which minorities generally have lower incomes.

How long before this happens here - in insurance as well as debt?

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