One of the concepts we try to educate our customers on are all the factors that insurance companies use to develop a rate for their insurance policies. Factors that may be used include your loss history, driving record, type of vehicle, location and something called an “Insurance Score”. In this article, we’ll talk about what makes up the Insurance Score and how your credit history impacts it. Once you are armed with some knowledge on the subject, an Independent Insurance Agent may be able to help you compare rates on the marketplace and save you some money on your portfolio.
What is an insurance score?
An insurance score is a rating used by insurance companies to determine the probability of an individual or family filing a claim. Over the years, insurance companies realized that customers with exceptionally good credit filed fewer claims and customers with below average credit filed more claims. Insurance companies developed the Insurance Score based on this concept. There are some other factors such as claims history that go into developing an Insurance Score, but the value is largely based on either an individual or blended credit rating.
Will applying for an insurance policy impact my credit rating?
The simple answer is No. Insurance applications are considered a “soft inquiry” which do not show up for lenders.
Does my insurance company or agent know my credit rating and details of my credit history?
No, they are never shown an actual credit rating or any details of your credit report. The only thing they may see is an Insurance Score market rating which is only based on your credit score number. The Insurance Score is one of the many variables that insurance companies use to develop a rate.
If I improve my credit score, will my insurance rate improve?
The general answer to that is most likely, yes. Since an Insurance Score is based on a credit rating, improving the same factors that improve a credit score will also improve your Insurance Score and therefore your rate.
What else can my Independent Insurance Agent do to help with my rate now?
An individual’s Insurance Score may fluctuate slightly from year to year and may even improve across larger periods of time. Our agency routinely checks your insurance score against your current carrier to see if it can help improve your current rate. We have helped hundreds of our customers navigate this process over the years. Most insurance companies will not increase a customer’s rate with a lowered score, but they will lower the premium or rate with an improved score.
Working with families as their trusted insurance advisor is what we do every day. Connect with us for an insurance review to make sure you are receiving the best rate possible.