The auto insurance score is a three digit number that the insurance industry uses to determine the likelihood of an insurance claim file. Also called as credit-based insurance score, major credit score providers calculate it using data from your TransUnion credit report. However, your auto insurance score has nothing to do with your credit score or driving record.
Who use this score?
During the past few years, these scores have become very prevalent and significant. Today, the country’s fifteen largest auto insurance companies including Allstate, GEICO, Nationwide, Progressive, StateFarm, and USAA use it. Your score can vary from company to company, and due to several other factors, as well.Does the score affect your insurance rates?
Besides standard factors like gender, age, marital status, profession, driving record, vehicle, demographics, your credit information is also taken into consideration while setting up your premiums. The National Conference of Insurance Legislators (NCOIL) Model Act strictly prohibits insurers from just using your credit information to set up your premiums. Hence, you shouldn’t be bothered about your insurance premiums skyrocketing suddenly due to a major drop in your credit score. You should not confuse the usage of the scores. They are just meant to predict whether you’ll file a claim and not if you’ll pay your premiums. Said differently, the scores attempt to foretell the future losses that the insurance company might suffer due to your claims instead of your future payment behavior. Having a good auto insurance score and a clean driving record at the same time is like a boon. This would help you qualify for lower rates.How to restrict your insurance carrier from using your credit?
Whether or not this practice is fair is still a controversial issue. However, the Fair Credit Reporting Act allows the insurance companies to use credit information. If you believe that your credit information is negatively affecting your insurance rates, you can check with your insurance company to see if it used credit scores while estimating premiums. Most large insurance firms that operate nationwide do. However, you may find a smaller, regional insurance provider that doesn’t.Conclusion
If you are already having a policy with a particular company that uses credit information to set premiums, they can’t suddenly change your rates based on whims to recheck your credit. In fact, if you are denied coverage or suffer from rate increase due to information in your credit report, you have rights. Know your rights by reading this brochure from the American Insurance Association.Blog Category