How do insurers determine how much insurance premium a person will pay? Generally, insurers use actuarial studies and other data to determine how likely you are to have a claim.
One of many factors that insurers may consider in determining your premium is your “insurance score” which is based in part on how you manage your credit. Studies have shown that those who have better insurance scores will be less likely to have claims than those with worse scores.
Most people benefit from good insurance scores because they receive a discount on their premiums. If the use of credit scoring were eliminated from consideration in setting premiums, the majority of people would see their premiums rise.
Below you will find information resources for those who would like to learn more.
- Background on: Credit Scoring (III)
This link provides background on insurance credit scoring from III and covers recent developments.
- Overview of Major Studies (APCIA)
This link provides a summary of major studies of insurance credit scoring.
- Insurance Scoring Saves Consumers Money (APCIA)
This document from APCIA describes the benefits to most consumers from insurance credit scoring.
- Banning Credit Data in Auto Insurance Underwriting Would Hurt Consumers (NAMIC)
This document from NAMIC provides an analysis of why underwriting restrictions on credit scoring harm consumers.