What is Insurance Credit Scoring?

When is your auto or homeowner's insurance policy up for renewal?

How is your credit?

Believe it or not, you will hear a lot more about this in the coming year. And it will affect you, big time. The insurance industry can, based on your credit report, raise your premiums, place you in a subsidiary, and even cancel your insurance altogether. This is done using a system called "Insurance Credit Scoring". The industry also refers to this as credit-based underwriting, credit-based insurance scoring, an insurance score, a company placement indicator, or an insurance financial stability score, Have you been the victim of "Insurance Credit Scoring"? If you have filed for bankruptcy, divorced, lost your job, or shopped for a home or automobile then you most likely have.

And as life does not always run smoothly and homes and autos are a necessity, chances are good someday you will be. In addition, be warned if you are a small business owner, a home-based business owner, seek credit counseling or if you pay off your large debts (mortgage, auto) early, you will be affected too.

Forget everything you know about checking and cleaning up your credit. "Insurance Credit Scoring" is a whole new ballgame and not only do consumers not know the score, they do not even know the rules of the game!

Insurance Credit Scoring is based upon the belief that that there is a direct statistical relationship between financial stability and risk. In other words, the lower your insurance credit score, the more likely you are to file claims, inflate claims, commit fraud and commit arson. This score is based solely on information contained in consumer credit reports from Equifax, Experian, and Trans Union. This insurance credit score is then used in conjunction with motor vehicle records, loss reports, and application information to determine your insurance risk at a particular point in time. Some companies have also started using insurance credit scores to non-renew coverage regardless of whether a claim has been filed or premiums have been paid on time.

Insurance companies will tell you that they have been using credit information actively for several years to help determine your level of risk before selling or renewing auto or homeowner's policies. So why is it becoming an issue now? Click here.