How Scoring Helps You
Improving your score can also lead to more favorable insurance rates.
Insurance scores give insurers a fast, objective measurement of the likelihood that you'll submit a claim against your insurance policy that will result in losses for the insurance company. Before the use of scoring, the underwriting process could be slow, inconsistent, and very subjective.
Insurance scores—especially FICO® Insurance Scores (the most widely used insurance scores)—have made big improvements in the underwriting process. Because of insurance scores:
People can get insurance faster.
Scores can be delivered almost instantaneously, helping insurers speed up application and policy approvals. Today many underwriting decisions can be made within minutes to determine whether a customer is eligible for insurance. Scoring also allows agents and internet "quoting" sites to make "instant insurance" decisions. Use of insurance scores also frees an insurance underwriter to focus more attention on those applications and policies that require greater attention.
Underwriting decisions are fairer.
Using scoring, insurers can focus only on the facts related to your insurance risk, and be sure they are making objective, impartial decisions. Factors like your gender, race, religion, nationality, and marital status are not considered by insurance scoring. Only pertinent and predictive credit-related information is evaluated in an insurance score.
However, please note: In the application process, your insurer will probably ask your age, gender, marital status, and where you live, because this information is often necessary to determine your insurance rate, or premium according to your insurer's state-approved rating plan. For more complete information, you can learn more about what's in your score and what's not in your score.
Credit "mistakes" count for less.
Improving your score can lead to more favorable insurance rates.
If you have had less than stellar performance paying back creditors in the past, insurance scoring doesn't let that haunt you forever. Past credit problems fade as time passes and as recent good payment patterns show up on your credit report. Because insurance scoring weighs all of the credit-related information—both good and bad—in your credit report, past mistakes can be counterbalanced by continuing good payment patterns.
More insurance is available.
Insurers who use insurance scoring can approve more applications, because insurance scoring gives them more precise information on which to base underwriting decisions. It allows insurers to identify individuals who are likely to perform well in the future, even though their credit report may show past credit management problems. People benefit from scoring even when their scores are lower than an insurer's minimum score for "automatic approval". Many insurers offer a choice of policies geared to different risk levels. Their policy guidelines may differ, so if you are turned down for one insurance policy, another may meet your needs. The use of insurance scores gives insurers the confidence to offer insurance to more people, because they have a better understanding of the risk they are taking on.
Insurance rates are lower overall.
When more insurance is available and there is greater competition among insurers, the cost of insurance for policyholders generally drops. Automated underwriting processes, including insurance scoring in most states, make the work more efficient and less costly for insurers, who in turn have passed savings on to their customers. And by controlling insurance losses using scoring, insurers can make rates lower overall.