An Explanation for the Weary Insurance Shopper
When I worked as a personal lines insurance agent, frustrated consumers
would ask me to explain insurance scoring to them on a daily basis. The
misconception was that of a scary
number that cost a lot of money and could ruin credit. Although a very complex subject, in this article I will shed some light on the basic concepts of insurance scoring and how your score affects you. I will also share a few tips that may help you improve your score.
number that cost a lot of money and could ruin credit. Although a very complex subject, in this article I will shed some light on the basic concepts of insurance scoring and how your score affects you. I will also share a few tips that may help you improve your score.
Basic Concepts of Insurance Scoring
In this section, the following topics
will be discussed:
- Two Types of Insurance Scores.
- Insurance Score Models Are Unique To Insurance Companies Insurance Scores Are Unique To You.
- Policies That Utilize Insurance Scores and the Quote Connection.
1. Currently, there are two types of
insurance scores.
- Non-Credit Based: This type includes personal information specific to you and does not consult your credit report.
- Credit Based: This type pulls basic information about how you manage your money from your credit report, and then adds personal information as in a non-credit based score.
If you would like to know which type your insurance company uses, ask your
agent. He/she should know or be able to find out for you.
2. Insurance Models Are Unique To
Insurance Companies Insurance Scores Are Unique To You
Insurance score models are different for each company and proprietary, so it
is impossible to know all the factors included for any company in particular.
There are hundreds of factors that go into creating an insurance score. Factors
such as where you live, what car you drive, type of coverage you carry, when
your policy renews, if you own your home, how you handle your money, age of the
drivers, marital status, loss history, driving record, etc, etc, etc, are
considered. There is even a company that factor in odd and even residential
street addresses.
Each company’s underwriting model is geared toward finding those viewed as
their “perfect customer.” Some company models are more youth and/or senior
driver friendly than others, and some are more forgiving toward those with
blemishes on their reports. Other models will calculate a higher score simply
for carrying more coverage or higher limits. The best thing to do is shop
around and asks questions. You and your neighbor could live in the exact same
house, drive the exact same car, carry the exact same coverage, and be offered
very different rates from the same insurance companies. Find a company that is
most friendly to your unique information.
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When
shopping, you may want to ask the agent:
- Will my initial insurance score stay with me through the life of the policy?
- Will I have a new insurance score calculated at each renewal?
- If I carry more coverage or higher limits, will my score improve?
- If my insurance score goes down, could I be cancelled?
- If my insurance score goes down, could it raise my premium, or is it only considered if it reduces my premium?
If you feel you have nowhere to go but up, you may want to find a company
that calculates a new score at each renewal. In most states, a new score at
renewal can only be considered if the premium is reduced. In this case, it
would work in your favor to have a new score calculated at every renewal.
3. Policies That Utilize Insurance Scoring and the Quote Connection
Personal lines auto and home policies use insurance scoring for underwriting
approval and rating. Some companies use scoring for auto only, some home only,
and others use scoring for both. Although heavily disputed, it is legal for
insurance companies to use insurance scoring of some type in most states.
Typically, insurance companies will honor rate quotes for only 30-90 days
because information could change on both sides during that time period. On the
company side, rates and underwriting rules can change. On the customer side,
loss history, driving record, and insurance scores can change. Your score can
change every 90 days. If you are not happy with a quote you receive, you may
want to request a new quote 91 days later. A new insurance score will be
calculated with the updated premium, and you could be offered a better rate.
How Your Insurance Score Effects You
In this section, the following topics
will be covered:
- Credit Based Insurance Scores And Your Credit Score
- Can You Be Denied A Policy Due To A Low Insurance Score?
- Can You Ask To See Your Insurance Score?
1. Credit Based Insurance Scores and
Your Credit Score
An insurance score is a numerical system intended to predict the risk of a
loss for insurance companies. It is completely different than the calculations
used by financial institutions to create credit scores. Your insurance score
does not necessarily go up and down with your credit score because information
from your credit report is only part of the equation. The role your credit
report plays is to determine how you handle your money. Insurance companies are
looking for information such as:
- Do you pay your bills on time?
- Have you been through bankruptcy?
- What type of credit accounts do you have?
- How much total credit do you have?
- How much of your credit is used verses open?
- How long do you keep your accounts?
The theory behind adding credit information to insurance score calculations
is...the lower a customer's credit score, the more likely the customer is to
make a claim. Remember, there are many factors considered in scoring
calculations, so having less than stellar credit is not a clear indication that
your insurance score will be low.
Please note, when insurance companies pull credit reports to calculate
insurance scores, credit scores do not change. Inquiries are processed as a
"soft hit" and show as an inquiry only.
2. Can You Be Denied A Policy Due To
A Low Insurance Score?
Yes, it is legal in some state to deny coverage or non-renew a policy based
on a low insurance score. Insurance rates are regulated by each state, but
underwriting guidelines are not. If you are denied coverage due to a low
insurance score, you may want to inquire again later. Some insurance companies
move underwriting thresholds for eligibility up and down to control how much
business they are writing. If you are not eligible with a particular company,
check again, you might be next time…especially if your score improves.
3. Can You Ask To See Your Insurance
Score?
When an insurance company denies a policy or offers less than their best
rate, it is called adverse action. When adverse action is the result of a low
insurance score, most states require the insurance company to notify the
customer by mail. They are also required to include a list of sources used to
determine the score. Insurance companies do not have to share the actual
insurance score with you; however, if you believe there is a reporting error,
you can inquire and correct it. By contacting consumer agencies that supplied
information to your insurance company, you can correct errors and ask the
insurance company to pull your reports again. The agency supplying incorrect
information should notify the insurance company of the update. A few of the
major players are listed in the Helpful Links box.
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Documents and What You Can Do To Improve Your Insurance Score
In this section, the following topics
will be covered:
- Documents Used To Determine Your Eligibility And Rates
- Tips To Help You Raise Your Insurance Score
1. Documents Used To Determine Your
Eligibility and Rates
To determine eligibility and rates,
insurance companies use the following:
- CREDIT report for credit based scoring.
- MVR (Motor Vehicle Record) report when applying for auto insurance.
- CLUE (Consolidated Loss Underwriting Exchange) report which lists claims history, insurance company payouts, and is often used with auto and home applications.
- Information that you supply on your application.
Be sure credit bureaus and data suppliers have accurate information on your
reports.
2. Tips to Help You Improve Your
Insurance Score
In addition to accurate reports:
- Drive safely to keep your MVR and CLUE reports clear.
- Choose higher limits and full coverage when appropriate.
- Choose deductibles that are comfortable for your wallet and still raise your score. Yes, your deductible choices can alter your insurance score.
- Consult with your agent regarding the consequences of submitting small claims.
- Do your best to pay your bills and taxes on time.
- Strive for well-aged accounts and avoid unnecessary inquiries.
As you can see, insurance scoring is quite intricate. The rules vary from
company to company and state to state. You may want to do a little state
specific research before going shopping. By visiting the NAIC (National Association Of Insurance
Commissioners) map, you can access state specific insurance websites.
Honorable
Recommendation:
You can take damage certificate and substitution, if you're not able to get the damage certificate from transporter you can not get the full payment of loss, the insurer can deduct twenty fifth to twenty fifth of the Loss quantity and that i suppose its higher than the rejection.
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William Martin
Financial Claims Made Simple
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