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Insurance Credit Scoring – credit based underwriting, credit based insurance scoring, an insurance score, a company placement indicator, an insurance financial stability score

Insurance information and your credit score.

Not many people are aware that their credit score can affect what they are paying for car insurance when it comes to their yearly premiums. Your credit score has been used for many years be every insurance company to determine what your insurance premium will be when figuring your rate and policy. They use the information to determine how much of a financial stability risk you may be should they decide to provide you with the type of insurance policy that you may need, A good credit score is going to be able to get you an amazing rate, as long as your driving record suggests that you have been a good driver as well as other details. Should you have a poor credit score, you are more than likely going to be deemed a financial risk and given a higher insurance premium to pay for your auto insurance.

The insurance companies use the three main consumer credit scoring reports to determine what your rate is going to be along with information that is found in your file. Of course we all know that the three credit reporting agencies are Trans Union, Experian and Equifax. The insurance company is going to measuring the likelihood that the consumer would file a complaint based on the information and her credit score. It really depends on what the agent finds as to what they will use to determine the quote along with that the person’s risk likelihood is determined. If you think about, it does make sense and seems pretty understandable, but you have to wonder how do they make their mind up and reach their conclusion?

There was a study that was done a couple of years ago on over 170,000 policy holders. They had filed complaints and they were done within a three year period, so the insurance companies pulled their credit reports and got to investigating. The study did find that where a common set of characteristics of credit that was found along with information that the consumers had filed many expensive claims. The study also found that they consumers characteristics included information on late payments, many public records, late fees and durations numbers of tax liens and bankruptcies. The insurance company compiles all this information and sees this as a higher risk of filing some kind in insurance claim and higher risk of insurance loss.

The studies that were conducted were to gather information, but you still have to wonder what in the world does this have to do with someones driving record? Really it does not have anything to do with it and insurance companies are not worried about you being involved in an accident. They are only concerned when you should happen to file a complaint in the result of some kind of accident. Insurance companies only make sure to file any kind of complaints when a loss has resulted or there is some kind of other result of an accident and other factors as well.

According to earlier mentioned information, a person’s driving history whether it is poor or not, holds less of a weight with a poor credit history. Insurance companies consider credit scores as their number predictor for a loss regardless of the driving record.

The only thing about this certain practice when it comes to auto insurance, is that companies reserve the right to raise or lower their rates at any time. The Department of Insurance is what regulates rates , but unfortunately they no do the underwriting. This simply means that the insurance company can do any kind of adjusting, underwriting, increasing, lowering or simply deny you any auto insurance coverage because of your credit score.

If you have a good credit score then you should have no problem getting a good insurance rate, but if not then you are in trouble. If you are someone who has anything on your credit, filed for bankruptcies or divorce, lost your job or any other kind of problem, then you are already a victim of this kind of practice. The only time anyone wins with this practice is when the credit industry gets what they want and that is money. Just about everyone has had some kind of problem to make their credit rating take a beating at one time or another and the insurance companies were sure to do their worst.

There are things that you can do though, to stop this from happening to you. We would suggest that you do further research on this topic and write your state and federal congressman about the concern as well as the issue. Make sure to stress that you want the practice banned. This practice has already been banned in the state of Hawaii, so why can’t it be in other states?

 

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