How Are Insurance Scores Determined?

If you have not heard of your insurance score, you are not alone. An insurance score, like a credit score, is based on information derived from your credit reports. Insurance companies have found that there is a correlation between the way you handle your credit and future accidents as well as your likely insurance claims. Although credit reports are used to establish both credit scores and insurance scores, there are also some important differences.

what is your insurance scoreYour credit score is based largely on your ability to repay what you have borrowed. Your insurance score goes beyond your credit report to look at the behavior of policyholders with similar credit temperament who have filed claims with the insurer. You should know that insurers set their own insurance scores, consequently, your score will vary from company to company.

A credit score, such as one from FICO, is used by 90 percent of US lenders. That score is based on five factors: your payment history, the amount of your debt, the length of your credit history, new credit and the types of credit. Loan approval and terms are based on your credit score.

Your insurance score will also look at the same factors, although your insurer likely isn’t interested in your income information or job history, criteria that banks and other lenders look at when deciding whether to extend credit to you or not. Even so, the better your credit score the higher your insurance score.

Insurance Score Determination

Auto Trends reached out to the insurance industry to glean more information about insurance scores. Kristofer R. Kirchen, president of Advanced Insurance Managers, LLC, in Tampa, Florida, directed us to the National Association of Insurance Commissioners (NAIC) website to learn how scores are determined.

Credit-based insurance scores are nothing new, arriving on the scene in the early 1990s. According to FICO, some 95 percent of auto insurers and 85 percent of homeowner insurers use credit-based scores. However, not all states allow credit-based scores, thus it is important for consumers to check with their state insurance department to learn what their state permits.

insurance scoreYou should also know that insurance companies may only consider your credit-based insurance score as “one factor in its underwriting process” according to the NAIC. If you are seeking coverage for a vehicle, the insurer will consider the make, model and age of your car as well as the age of the drivers, the miles driven annually and your zip code. Yes, you can ask your insurer if an insurance score was factored to underwrite and rate your policy. You should also ask your insurer what risk category you were placed in after your quote was received.

Obtain Your Score and Improve It

Kirchen noted that provides both your credit score and your insurance score for free. You need to register with that website, by providing an email address and a password to track that information. This writer has been using Credit Karma and found his insurance score by clicking on the “view all my scores” button. In this case two scores were presented: an auto insurance score and a home insurance score with only a small numerical difference between the two.

If your insurance score is low you can improve it the same way you can raise your credit score: by using your credit wisely, paying your bills on time and reducing your debt. Kirchen also advises consumers to clean up collection activity as found in their credit reports. You can obtain one free copy annually of all three of your credit reports by visiting

Now About That Claim

It is important for you to know that placing a call to your insurance company to report an incident when there is no damage to either vehicle should always be avoided. That call will show up on your claims history even though no pay out was made noted Glenn Jacobs of the Jacobs Agency in Knoxville, Tennessee. Your insurance score will suffer and as a consequence, you may be charged a higher rate for auto insurance.

See AlsoYour Insurance Score and Insurance Premiums

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