What is credit-based insurance scoring?
Credit-based insurance scoring is a common rating factor in the insurance industry. It is used to help insurers assess risk and determine premiums. A common misconception is that they function like credit scores used by lenders to predict loan payments. Insurance scores are specifically designed in an effort to predict property and casualty insurance losses.
How insurance scoring works
Insurance companies use credit reports and insurance scores to calculate risk. Actuarial data has consistently shown a correlation between these insurance scores and future insurance losses. By using this data-driven approach, insurance companies can:
It is important to note that credit-based insurance scores are just one factor among many in pricing decisions. Every insurance policy pricing decision is comprised of a variety of pricing factors to reach the applicable premium.
The role of LexisNexis Risk Solutions
Many insurance companies, including Indiana Farm Bureau Insurance, use the Attract insurance scoring services provided by LexisNexis Risk Solutions Inc. As a Consumer Reporting Agency, as defined by the Federal Credit Reporting Act (FCRA), LexisNexis Risk Solutions:
Accessing insurance score reason codes
If you receive a notice from your insurance company stating that credit-based insurance scoring was used, you can look up specific reason codes to understand the factors that influenced your score. LexisNexis Attract reason codes can be found online.
State laws and compliance
Credit-based insurance scoring is regulated in each state where its use is permitted. Indiana Farm Bureau Insurance applies insurance scores in accordance with applicable laws and regulations.
Conclusion
Credit-based insurance scoring allows consumers to pay premiums that better reflect their individual risk characteristics, rather than being charged based on broad averages.
Find a local Indiana Farm Bureau Insurance agent today to learn more and receive a quote.
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