Contact:
Karl Newman, President Washington Insurance Council
Phone: (206) 624-3330
Fax: (206) 624-1975
karl.newman@wiconline.org
Credit-based insurance scores
prove both fair and accurate
SEATTLE
– What does a person’s
credit history have to do with auto insurance? A whole lot more than
most people think. Credit-based insurance scores are used by more than
90 percent of auto insurance companies in the United States. Why? Because
they’ve proven to be a very accurate way to predict the likelihood of
a person experiencing a loss and filing an insurance claim.
“Insurance scores give insurance
companies another tool to ensure that customers get a fair rate, based
on each policyholder’s unique circumstances,” said Karl Newman, Executive
Director of the Washington Insurance Council. “In fact, insurance scores
can allow companies to give policyholders lower preferred rates when other
factors such as type of vehicle or driving record would normally require
higher rates.”
Here
are some key facts about insurance scoring:
An insurance score is a
numerical rating based on factors such as timely payment of bills, public
notices, bankruptcies, tax liens and credit inquiries. Some insurance
scoring models also include prior claim history.
Insurance scores are only
one of many rating factors used to determine eligibility and rates.
Some of the others are age, driving record, vehicle, and mileage driven.
Insurance scores have proven to
be a very accurate way to predict future claims. Separate studies conducted
for insurance regulators and insurance companies have shown a very strong
statistical correlation between low credit scores and frequent claims.
Insurance scores do not
discriminate against lower income groups. A low insurance score has
nothing to do with income and everything to do with how people manage
their money. In fact, some of the best insurance scores appear among
low and moderate-income groups.
An insurance score will not be affected
by inquiries from most insurance companies.
An insurance score does not consider
personal characteristics such as age, gender, income, net worth, home
address or ethnicity.
Insurance scores do not
include specific information about outstanding loans.
The Federal Fair Credit Reporting
Act of 1970 and Washington State’s 1993 Fair Credit Reporting Act allow
insurance companies to use credit information when evaluating insurance
coverage.
Using credit wisely is
the best financial strategy for maintaining a healthy credit profile.
For a free brochure that includes information about how consumers can manage
or improve their credit profiles, contact the Washington Insurance Council
at (206) 624-3330 or (800) 664-4942.
Washington Insurance Council is a nonprofit consumer education organization
funded by member insurance companies.
