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Guide to Insurance Scoring

What is Insurance Scoring and how is it used?

This information is taken from the LexisNexis Risk & Information Analytics Group Inc. 

Why do insurers need to pull credit history?

Insurance companies use financial history along with other factors (such as years of driving experience or claims history) to properly classify an insured according to his / her potential risk.  Studies have shown a correlation between a consumer’s financial history and his / her future insurance loss potential.  Thus, insurance companies believe the use of credit helps to underwrite an applicant at a cost the reflects their specific risk.

What is an insurance score?  How does it differ from a financial credit score?

An insurance score is a credit-based statistical analysis of a consumer’s likelihood of filing an insurance claim within a given period of time in the future. This data can help underwriters better assess risk exposure prior to granting insurance coverage.

A financial credit score is a credit-based statistical analysis of a consumer’s likelihood of paying an installment loan (mortgage, auto loan, etc.) or revolving debt (credit card, etc.) when due. Creditors use the score to help determine whether to grant credit.

Using statistical models, a consumer’s credit information is compared to the performance of consumers with profiles similar to the subject consumer. A credit scoring system awards or subtracts points for various factors or variables in the credit report to determine the score. The score predicts the likelihood of certain events occurring.

Most scoring systems generate “reason codes” in addition to the numeric score. The reason codes will identify up to four principal factors that most greatly influenced the score.

Are insurance companies authorized to obtain a copy of the consumer’s credit report?

The protection of personal privacy and the responsible use of information are cornerstones of LexisNexis’ business practices. Only businesses or individuals with a “permissible purpose” can access a consumer’s credit report. LexisNexis complies with the guidelines of the FCRA which was approved by Congress in 1970 and amended effective 1997 and 2004.

Per the FCRA, LexisNexis (as a Consumer Reporting Agency) may furnish a consumer report for the following insurance related purposes:

  • To a person or company that LexisNexis has reason to believe intends to use the information in connection with the underwriting of insurance involving the consumer. This includes situations where the consumer asks for an insurance quote or applies for insurance or is being considered for renewal.

In such circumstances, the transaction to LexisNexis ordering the credit report is initiated by and at the request of the insurance company or agent.

How can I improve my insurance score?

Please visit www.consumerdisclosure.com and select “ChoicePoint Attract Insurance Scores and Reason for Codes” for more infomormation on insurance scoring and ways you can improve your score.

Contact ChoicePoint

For more information, please contact the ChoicePoint Consumer Center:

P.O. Box 105108

Atlanta, GA 30348-5108

Phone: 800-456-6004 (24 hours a day)

Web: www.consumerdisclosure.com