What Is An Insurance Score

I am not a big fan of insurance scoring but insurance scoring is quickly becoming the insurance industries favorite tool to evaluate risk.  It is important to know how insurance scores are derived and used so everyone can manage credit to their benefit.

What Is An Insurance Score

An Insurance Bureau Score is a snapshot of a consumer’s insurance risk picture at a particular point in time based on credit history report information. Since insurance scores have been proven to be highly predictive of the potential for future losses, they help insurance companies determine the likelihood that a customer will file a claim, and thus allow carriers to set rates that are accurate and appropriate for each customer. This enables carriers to offer insurance coverage to a broader range of customers. Insurance scores are used in the same way as other traditional underwriting factors. As a group, people with certain patterns in their credit history receive lower insurance scores and are more likely to experience a loss and file a claim. They are charged a higher premium to reflect that risk. This allows insurers, to give better rates to consumers with higher insurance scores, who are less likely to file a claim. Credit history helps predict the potential for future losses, but it is not the sole factor in determining the cost of insurance. It is one of several factors used to arrive at the best rate possible. The age of a driver, motor vehicle records, loss reports or application information are other important factors that are also used to determine your rates. Generally speaking, customers who have high (good) insurance scores qualify for lower rates. Insurance Bureau Scores are based solely on information in consumer credit reports. Insurers will typically ask for a current score when they receive a new application for insurance so they have the most recent information available.

An Insurance Score May Include:
Payment history
Bankruptcy, foreclosures and collection activity
Length of credit history
Amount of outstanding debt in relation to credit limits
Types of credit in use (i.e. mortgages, installment loans)
Number of new applications for credit)