Insurance Scoring

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.

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.

Insurance scores are numerical ratings developed from certain attributes of a person’s credit history.

An insurance scoring considers primarily:

New applications for credit

Amount of outstanding debt

Types of credit in use and length of credit history

Payment history

Bankruptcies

Collections

Insurance scores are not a measure of an individual’s financial assets, but instead, reflect how well individuals manage their financial affairs.

Insurance scores take into consideration only those characteristics from a credit report that are relevant to predicting loss potential.

While paying your bills on time has an impact on your insurance score, other factors like the amount and frequency of credit usage also influences your score.

An insurance score does not take into account:

Income

Race

Gender

Religion

Marital status

National origin

Insurance score help insurers in following ways:

Insurance scores provide an objective tool that insurers use along with other applicant information to better predict the likelihood of a consumer filing claims.

Insurance scores also help to streamline the decision making process, so that policies can be issued more efficiently.

By accurately predicting the likelihood of future claims, insurers can control their risk, enabling them to offer insurance coverage to more consumers at a fair cost.

most of the insurance companies use insurance scoring before giving their insurance policy to anyone.