Understanding Insurance Scores

An insurance score is a credit-based statistical analysis that helps predict a consumer’s likelihood of filing an insurance claim in the future. It is not a measure of a consumer’s ability to borrow money.The insurance score is one of the primary determinants in how much monthly premium a consumer will be assessed.

Why do insurers use credit? 
Scores help streamline the decision process, so policies can be issued faster and at an appropriate price to the consumer.

What variables are used to create an insurance score? 
It is calculated based on your credit score, your accident history, and your insurance history. When you apply for auto insurance, insurers will calculate your rates based on a number of factors — including your age, ZIP code and the make and model of your car. Some credit variables that are used include: outstanding debt ratio, new credit activity, types of loans, payment patterns, public records and past due amounts. 

How are insurance scores used? 
Decisions about how insurance scores are used to affect coverage and rates are made by the insurance companies. Insurers make underwriting decisions based on their own business requirements.

Are insurance scores regulated? 
Insurance companies’ use of insurance scores is regulated by federal and state law. The federal Fair Credit Reporting Act permits insurance companies to use credit in underwriting transactions and protects consumers’ rights. Most states have passed laws strengthening consumer protections.

How can I find out what my insurance score is? 
A consumer may order his or her own insurance score via the ChoiceTrust™ website at www.choicetrust.com.