1- What Is An Insurance Score?
An insurance score is a snapshot of your insurance risk picture at a particular point in time based on information in your credit report. Statistics have proven that people with a higher insurance score tend to file less claims. Insurance companies use your insurance score as one of the many factors to determine your insurance premiums.
2- How Is My Insurance Score Determined?
Every insurance company is different and has their own way of determining your insurance score. But basically they enter your credit information into a computer model which analyzes your information and generates your insurance score. Your insurance scores change as new information is added to your credit report, so insurance companies will typically re-run your score when you apply for a new insurance policy or your current policy is being renewed.
3- Are Insurance Scores The Same As Credit Scores?
No. Your financial credit score is used to indicate your ability to repay borrowed money. Your insurance score is used to predict the likelihood you will have future insurance claims.
4- How Do Insurance Companies Use My Insurance Score?
Insurance companies use your insurance scores along with many other variables to determine your premium. Insurance scores serve as tool to better estimate the likelihood your will have future claims. B y doing this, insurance companies can better control risk, enabling them to offer insurance coverage to more people at a fairer price.
5- What Information Affects My Insurance Score?
An insurance score is generally based on your payment history, bankruptcy, foreclosures and collection activity, length of credit history, the amount of outstanding debt in relation to credit limits, types of credit in use, and new applications for credit. An insurance score does not take into account your income, race, gender, marital status, religion, age, geographic location, nationality, ethnicity, or handicap. It only considers your credit history.
6- I Have An Excellent Credit Rating, Does This Mean I Qualify For The Best Insurance Premiums?
Since your insurance score measures items related to insurance losses and credit scores measure creditworthiness… these scores may be very different. Additionally, insurance companies use many other factors when determining your premiums. For your auto insurance they also use factors such as driving record, prior loss history, and vehicle type. For your homeowners insurance they also use factors such as loss history, construction type, distance to fire stations and fire hydrants, and presence of protective devices such as smoke detectors and alarm systems. State laws and regulations can also vary… so the factors that insurance companies use to calculate your premiums may differ by state.
7- Does The Use Of My Insurance Score Affect My Credit Rating?
No. There is no affect on your credit rating when an insurance company makes an inquiry into your credit history. However, the inquiry may be present on your credit report, should you choose to obtain one.
8- What If Information On My Credit Report Is Wrong?
If you find errors on your credit report, you should report the errors to the credit reporting agency. By law, the credit reporting agency must investigate and respond to your request. Once these errors have been corrected, please notify the insurance company as you may qualify for a more favorable rate. But please be aware that some errors may have little or no affect on your insurance score and/or insurance premium.
Insurance Blog - By Jennifer Wells, CISR 