Is Insurance Scoring Accurate?
You might wonder why your credit related history has anything to do with your insurance rates. Are they related in any way? According to some insurers, yes. They report that they make good business decisions by incorporating scored generated from your credit reports. A number of studies have tried to make a final judgment, but of course the results differ depending on who you ask.
Note that insurers may not understand completely how insurance scores work. Just like lenders, they don’t need to know about the nuts and bolts behind the scores. Lenders have some understanding of how credit scores work, but they mostly just use them because they like the results they get. The same thing goes for insurance scores. As long as there appears to be a correlation, they don’t seem to care what the actual cause and effect relationship is.
Is Insurance Scoring Unfair?
Insurance scores are not well understood. As a result, there’s room for abuse. Some argue that scores are not based on anything but smoke and mirrors, and that they’re used to discriminate against some segments of the population. Lower income families and some minority groups seem to suffer from insurance scores more than higher income folks. The exact reason is a mystery. It could be that insurance scores are discriminatory, or it could be that historical inequalities are still affecting some groups. You’ll hear plenty of arguments from both sides in the coming years.
Regulators have looked at insurance scores to see if there are any signs of discrimination. They have not announced that the scores are unfair. Again, several organizations have tried to study insurance scores, and the results differ depending on who you ask.
Can I See my Insurance Scores?
If you want to know how you score, you can try to see your insurance scores. Keep in mind that you never know which type of score a given insurer will use – it could be an in-house model, one built by Fair Isaac, or one built by ChoicePoint. You’ll have to ask your insurer what they use if you want meaningful information. If you’d like to try your luck at ChoicePoint, visit their consumer Website ChoiceTrust. Note that they claim that they are not required to give you a free disclosure, so you’ll have to pay a modest fee for your score.
How do I Get My Money’s Worth?
To have the best insurance scores, you need to make sure they’re scoring you on good information. First, understand how your credit works, and use credit wisely. Take a look at the FICO credit score to get a good idea of what companies may be looking for. Next, make sure you fix your credit report if there are errors. Be aware that you are entitled to one free credit report per year from each credit reporting company. Don’t bee fooled into paying or signing up for a service unless you need to – use the official Website for your free reports. Finally, shop around and get insurance quotes from a variety of sources – some may treat you better than others.
