Scoring Models For Occupational Disability Insurance

Advisors, Scores

Increasingly, insurers advertise that they are working with so-called scoring models when calculating premiums for occupational disability insurance.

With the help of additional questions about the specific structure of everyday working life, the insurer should be able to get a more realistic picture of the risk to be insured. Customers and intermediaries should welcome it if a more realistic assessment of the job description leads to a lower premium in many cases.

Sometimes the impression is given that the use of a scoring model would make inquiries about the profession superfluous. “However, this is by no means the case”, warns the insurance specialist of infinma Institut für Finanz-Markt-Analyse GmbH, based in Cologne, Germany.

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Drawing Investors From More Than 100 Countries

Scores

Mintos introduced a new lending companies evaluation model, Mintos Risk Score.

At the onset of the COVID-19 pandemic, many existing investors at Mintos, one of Europe’s leading alternative investment platform for investing in loans, decided to abruptly halt or reduce their investing activity while they waited for a clearer economic outlook, writes AS Mintos Marketplace, a joint stock company registered in the Commercial Register of the Republic of Latvia: “Furthermore, the global downturn in 2020 led to a sharp increase in underperforming loans, many of which eventually ended up delinquent. Mintos was quick to react by creating and expanding teams within the company dedicated to loan recovery.”

“Despite these challenges,” reports Mintos CEO and co-founder Martins Sulte, “over 80% of the total funded portfolio sustained their strong performance and delivered a total €53.3 million in interest earnings to investors. This shows a significant increase of 18.9% when compared to the €45 million earned in 2019.”

In 2020, 128,380 new users joined Mintos, bringing the platform to a total number of 369,332 investors from 105 countries. And with an addition of €1.6 billion in loans funded in 2020, the cumulative volume of funded loans grew by 37.2% to reach €5.9 billion.

Despite market ups and downs, the Mintos team focused on continuous service improvements. In January a new lending companies evaluation model was introduced – Mintos Risk Score. To help investors make informed decisions about investing in loans, Mintos expresses findings with the Mintos Risk Score. The Mintos Risk Score is calculated from 4 subscores that they assign for the company’s loan portfolio performance, the efficiency of loan servicing, buyback strength, and legal setup between the lending company and Mintos.

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Weighing the Score of ‘bbb+’ for the Swedish Banking Market

Scores

The Swedish rating agency commits itself to the general outlook for the banking sector in Sweden.

Nordic Credit Rating (NCR) applies a score of ‘bbb+’ for the Swedish banking market and expects an economic upswing in 2021 led by external demand for Swedish exports and the eventual rebound in services and tourism during the third quarter of 2021.

“Our expectations of the economic environment are dependent on a large proportion of the population being vaccinated by the summer and the subsequent lifting of restrictions on travel and the service sector. As the rebound takes effect,” says Sean Cotten, NCR’s chief rating officer, “we believe unemployment will fall quickly, especially among younger adults, who have been disproportionately affected by the loss of service and seasonal work.”

Despite material government support provided during the pandemic, Sweden’s creditworthiness remains strong in the eyes of NCR. This strength bolsters their assessment. Housing prices increased by 11.5% in 2020, with significant growth from May to November before the second wave of the pandemic slowed activity in December. NCR believes that the pace of housing price growth in 2021 will be more in line with the long-term 6% growth rate.

“NCR believes that the Swedish banking market has demonstrated its resilience during 2020 allowing banks to improve capital buffers and provide credit to corporations and private individuals,” says Sean Cotten. “We expect somewhat higher realised credit losses during 2021, but expect banks to continue to perform well as the economy normalises in the second half of the year.”

The Swedish rating agency gives the approximate weight of the mentioned score in the rating of Swedish banks:

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German Communities Demand Good Social Credit Rating When Buying Land

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The allocation guideline for the allocation of community-owned building plots in the development plan area “South of Adolf-Reichwein-Strasse” in the Rodenbach community provides an example of applied social credit rating in Germany.

As part of the reallocation process, the municipality of Rodenbach acquires areas to implement the objectives pursued with the land-use planning. The municipal council of the municipality of Rodenbach resolved the following guidelines for the allocation of building sites with a view to a socially and urban-planning sensible building and land policy. The aim is to cover the housing needs of population groups with special housing supply problems, as well as the housing needs of the local population. The priorities are set under a socialist majority in the local council and with an SPD mayor for a family-friendly and sustainable development.

The developer has been entrusted with the development of the building area ‘south of Adolf-Reichwein-Straße’ and thus also with the sale of the building plots. The construction sites are to be allocated according to social criteria and with local residents, taking into account compliance with EU law. The award procedure for the building sites that are owned by the municipality of Rodenbach after completion of the reallocation procedure is regulated by the following award guideline, which comprises a specific rating system.

Rodenbach is a municipality in the Main-Kinzig district, in Hesse, Germany. It is situated on the river Kinzig, 8 km east of Hanau. Rodenbach is located about 20 kilometers east of Frankfurt am Main on the edge of the Vorspessart and is largely surrounded by forest, which is part of the Hessian Spessart Nature Park. Both districts are located on the stream of the same name, which is called the Lache in its lower reaches. It flows southwest of Rodenbach through the Bulau and there flows into the Kinzig, which flows north past Rodenbach towards Hanau. The next larger city next to Hanau is Langenselbold. The topographically highest point of the municipality marker is at about 245 m above sea level.

So-called “local residents’ models”, taking into account the basic right to freedom of movement, shall enable lower-income and less well-off residents to acquire adequate housing in their home municipality. In this way, an intact socially and demographically balanced population structure and social cohesion in the community should be preserved.

The following criteria are used in the specific case of Rodenbach and give an example of socialism in Germany. The following criteria are believed to ensure fair and traceable allocation of the properties:

  1. Applicants’ need according to social criteria such as number of children, relatives in need of care,
  2. Applicants’ need for income,
  3. Exercising an honorary position,
  4. Applicants’ reference to the municipality of Rodenbach, taking into account the length of time their main residence, employment / business practice.

The municipality board is authorized to allocate part of the land in a direct procedure, provided there is a public interest (e.g. doctors, pharmacists).

The building site applicant list is the basis for awarding building plots according to a point system.

Requirements for an Application

In the award procedure, the applications of the persons are considered who are entitled to apply according to the criteria listed here and who can prove the correctness of the information if required by submitting appropriate evidence upon request. Information that cannot be verified cannot be taken into account.
It is expressly pointed out that all information provided by the applicant must be correct and complete. This must be confirmed with a signature when applying. Incorrect or incomplete information can lead to exclusion from the award procedure or, after the award decision, to reversal.

  1. Asset limit: Applicants may have a maximum of assets equal to the value of the property. Applicants are not allowed to own a plot of land that can be built or a property in the municipality of Rodenbach. Real estate property outside the municipality of Rodenbach, on the other hand, is counted as assets, but is not an exclusion criterion.
  2. Upper income limit: Applicants may earn a maximum income (total amount of income) as an average according to the tax assessments of the last three years, taking into account the average nationwide annual income. The following income limits must not be exceeded: Individual € 51,000, couple € 102,000. If the acquisition is made as a couple, the calculation is based on the added income in relation to twice the average income. A tax exemption of € 7,000 per dependent child must be added to the upper limit.
  3. Applicants must be of legal age with unlimited legal capacity at the time of application.
  4. Applicants must meet the requirements listed in the procurement guidelines.
  5. Only one application will be considered per household: Only one property application can be submitted per couple, family, registered partnership, cohabiting community, cohabiting community or single parent.
  6. Applicants undertake to acquire the property in their own name. Applicants must also be the contractual partner or purchaser in the sales contract. A transfer of the property to third parties (also within the relatives) is excluded.

Award criteria

The eligible applications will be evaluated according to the following award criteria and the point system. The amount of points achieved is decisive here. A ranking list will be created. The higher the number of points, the further up the ranking is. If the points are equal, then chance decides.

Social Credit Rating system

The land is awarded by the municipality board. For each applicant a score is calculated. The following point system is used:

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General terms and conditions

  1. The purchase process takes place on the basis of a uniform standard purchase contract.
  2. As the seller, the municipality of Rodenbach will appoint the notary’s office.
  3. If the applicant confirms in writing within eight weeks, a notification is sent to the notary to set a date for the notarization. The purchase agreement must be notarized within a period of 3 months after the decision.
  4. If a purchase contract does not come into existence, plots that become available again are offered individually to successors in accordance with the order of criteria.
  5. It is assumed that the intended construction project can be financed by the applicants. A current confirmation of financing must be submitted with the application.
  6. 30% of the purchase price is due upon certification, 70% of the purchase price upon completion of the development (preliminary stage expansion).
  7. In certain cases, the seller reserves the right to repurchase the property in accordance with §§ 456 ff. BGB or the obligation to make additional payments: a. In the event of incorrect information from the applicant in the award procedure. b. In the event of a violation of personal use and sales restrictions. c. In the event of a breach of the construction and purchase obligation.
  8. Right of repurchase: When exercising the right of repurchase, the municipality has to repay the purchaser the purchase price minus any depreciation, encumbrances and plus connection costs; Likewise, the building value is reimbursed for developed properties. The building value is determined by the responsible expert committee (Office for Land Management).
  9. Additional / additional payment obligation: If the return transfer is not used, the purchaser undertakes to reimburse an appropriate part of the discount to the municipality. This percentage is calculated from the period that is missing up to 10 years of use, i.e. a refund of the discount of 10% per year.
  10. Construction / purchase obligation: With the purchase of the property, the purchaser undertakes to build a residential building within a period of 3 years from the completion of the development (preliminary expansion) according to the stipulations of the development plan (ready for occupancy).
  11. Own use: The properties are sold with a personal use obligation. This means that the purchaser undertakes to live in the house without interruption for a period of 10 years after it is ready for occupancy. If the property consists of 2 residential units, the buyer has to live in one residential unit with primary residence for the specified period. If you move out earlier, the obligation of the percentage reimbursement of the discount to the municipality according to point 9 also applies here.
  12. Sale restriction: If the property is sold or given away in whole or in part, the municipality of Rodenbach has the right to buy back the property.

The Road Ahead For Social Credit Rating

Advancement

The municipality of Rodenbach grants a child bonus in the form of a discount on the sales price on the purchase of building land for the construction of residential buildings for personal use. The children for whom the applicant is entitled to child benefit and who live in his household when the purchase contract is concluded and are registered with their main residence are taken into account. Applicants receive a discount of € 5 per child per square meter. The maximum discount is limited to € 15 per applicant.

Note on legal entitlement

Citizens have no claim, since there is no legal claim to the allocation of a communal building plot. There is also no legal entitlement to the maintenance of the procurement guidelines. By participating in the selection process, the interested parties declare that they agree that a judicial review of the award process is excluded.

Reservation

A plot of land is reserved for 2 months without obligation and free of charge. If a purchase decision is not yet possible, the reservation will be withdrawn and the property will be released again for new interested parties. The municipal council of the Rodenbach municipality discussed the allocation of the municipality’s own building plots in the construction area “south of Adolf-Reichwein-Straße” at the public council representatives meeting on November 12th, 2020 and decided to make the allocation in accordance with this allocation guideline.

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Credit Rating and Residual Debt Insurance

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The question of the extent to which the creditworthiness of the borrower has an impact on the take out of a residual debt insurance is repeatedly the subject of discussions, i.e. whether consumers with lower creditworthiness are sold residual debt insurance more often than consumers with better creditworthiness. The German Federal Financial Supervisory Authority (bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) has examined this question. There was also a survey of credit institutions in Germany.

Before lending, credit institutions have to check the creditworthiness of the respective borrower. This also applies to installment loans to consumers. As a result of their creditworthiness check, the credit institutions classify the borrowers in different credit ratings or clusters. The number and definition of the credit rating levels used differ considerably from one institution to the next. The number of existing credit ratings ranges from three clusters to 20 clusters.

The conditions for consumer loans are predominantly – if not without exception – based on the creditworthiness of the borrower. 15 of the 30 credit institutions surveyed stated that the level of the interest rate on the loan depends on the borrower’s creditworthiness. The higher the risk of default of a borrower, the more expensive the loan becomes, and consequently the loan interest payable increases with decreasing creditworthiness.

In contrast, there are institutions with a uniform interest rate for all credit clusters. Here, the customer’s creditworthiness has no effect on the interest on the loan. At other credit institutions, however, the price of the consumer loan was based on a combination of creditworthiness and duration or a combination of creditworthiness, duration and loan amount. In this respect, the creditworthiness of the customer is regularly a price-determining factor among several factors. It could not be determined that generally borrowers with a lower creditworthiness are more often sold residual debt insurance than borrowers with a better creditworthiness.

An industry-standard procedure could not be determined after evaluating the answers. The credit institutions handle the issue individually and differently. For some of the credit institutions surveyed, it is the case that more residual debt insurance tends to be taken out when creditworthiness declines, while the rate of residual debt insurance contracts tends to be lower in good creditworthiness. After all, this affects nine of the 30 credit institutions surveyed. At the other credit institutions, on the other hand, based on the closing rates requested, there was no evidence that if the creditworthiness of the borrower fell, more residual debt insurance was sold than for borrowers with a better creditworthiness.

There was also no uniform picture on the question of whether taking out payment protection insurance has an impact on the pricing of the consumer loan. At different credit institutions, the borrowers of a credit rating cluster pay the same amount of interest on their loan, regardless of whether they have taken out residual debt insurance or not. At four banks, the interest rate for loans with residual debt insurance was even higher than for loans without residual debt insurance; This means that loans in the same credit rating with residual debt insurance sometimes even cost significantly more than loans without residual debt insurance. In the case of one institute, however, the figures presented showed that a consumer loan with residual debt insurance was cheaper in terms of the loan interest rate than the loan without residual debt insurance.

The reasons for the different influences of residual debt insurance on the price of the loan remained largely open. This also applies to the remarkable result, according to which the nominal interest rate for loans with residual debt insurance at various banks was higher than for loans without residual debt insurance.

However, one credit institution explains that there was no direct causal connection in this respect. Rather, the interest rate for loans at this institute depends on the creditworthiness. However, the connection rate of residual debt insurance for online contracts is much lower than for contracts concluded in the branch; at the same time, the interest rates for consumer loans concluded online are significantly lower than the interest rates for loans concluded in face-to-face business. The different pricing of consumer loans with and without residual debt insurance for borrowers in a credit rating cluster would only be the result of the different pricing of consumer loans in online business and in face-to-face business. It has not been clarified whether this explanatory model can also be used as the basis for the higher pricing of loans with residual debt insurance found at other banks. However, this shows the great importance a detailed price comparison at several institutes can have for consumers.

Driving Fitness Rating System

Definitions, Read, Scales, Scores, Symbols, Systems

On May 1, 2014, the German Central Register of Traffic (VZR) became the Driving Fitness Register (FAER). The existing scoring system was converted to the new driving fitness rating system.The basis for this is the fifth law amending the Road Traffic Act and other laws of August 28, 2013 and the Ninth Ordinance amending the Driving Licenses Ordinance (FeV) and other road traffic regulations from November 5, 2013.

A prerequisite for a scoring in the driving fitness rating system is on the one hand a listing of the infringement in Appendix 13 to § 40 FeV and in the case of misdemeanors on the other hand, the fine imposed at least 60 euros.

Unlike in the VZR, the FAER only records the decisions on misdemeanors which have an impact on the safety of road traffic. Administrative offenses such as the prohibited entry into an environmental zone are no longer stored in the FAER. Therefore, the decisions that were stored in the VZR until the end of the April 30, 2014 and that can not be saved according to the new rules for the FAER, were deleted on May 1, 2014.

Only the fact that the infringement is listed in Annex 13 to Section 40 FeV is decisive for the storage. In this context, however, it is not necessary for the fine to be at least EUR 60, since the registration limit at the time of the commission of the administrative offense (before May 1, 2014) was 40. euro.

However, fines that are no longer to be stored in the FAER are appropriately increased.The entries stored in the FAER are provided to the driving license authorities for the purpose of checking the fitness to drive.

In place of the previous points system with an assessment of offenses of 1 to 7 points, the driving fitness rating system was established with new ratings. According to this, the registered offenses or misdemeanors are divided into the following categories depending on their importance for traffic safety (§ 4 (2) Road Traffic Act (StVG)):

  • 3 points: Offenses related to traffic safety or equivalent offenses if the driving license has been withdrawn or if a lock-up period has been granted for the issue of a driving license
  • 2 points: Offenses related to traffic safety or equivalent offenses without removal of the driving license or without a waiting period for the issue of a driving license; particularly traffic safety impairing or equivalent offenses
  • 1 point: Traffic offenses or equivalent offenses