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Karl Newman, President
Sandi Henke, Communications Director    
NW Insurance Council    
Phone: (206) 624-3330 / (800) 664-4942
Fax: (206) 624-1975
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Credit-based insurance scores prove both fair and accurate

SEATTLE - What does a person’s credit history have to do with auto insurance?  A whole lot more than most people think. 

Credit-based insurance scores are used by more than 90 percent of auto insurance companies in the United States.  Why?  Because they’ve proven to be a very accurate way to predict the likelihood of a person experiencing a loss and filing an insurance claim. 

“Insurance scores give insurance companies another tool to ensure that customers get a fair rate, based on each policyholder’s unique circumstances,” said Karl Newman, president of the NW Insurance Council. 

“In fact, insurance scores can allow companies to give policyholders lower preferred rates when other factors such as type of vehicle or driving record would normally require higher rates.”

Here are some key facts about insurance scoring:

  • An insurance score is a numerical rating based on factors such as timely payment of bills, public notices, bankruptcies, tax liens and credit inquiries. Some insurance scoring models also include prior claim history. 

  • Insurance scores are only one of many rating factors used to determine eligibility and rates.  Some of the others are age, driving record, vehicle, and mileage driven.

  • Insurance scores have proven to be a very accurate way to predict future claims. Separate studies conducted for insurance regulators and insurance companies have shown a very strong statistical correlation between low credit scores and frequent claims.

  • Insurance scores do not discriminate against lower income groups.  A low insurance score has nothing to do with income and everything to do with how people manage their money.  In fact, some of the best insurance scores appear among low and moderate-income groups.

  • An insurance score will not be affected by inquiries from most insurance companies.

  • An insurance score does not consider personal characteristics such as age, gender, income, net worth, home address or ethnicity.

  • Insurance scores do not include specific information about outstanding loans.

  • The Federal Fair Credit Reporting Act of 1970 (Amended in 2003) and Washington State’s 1993 Fair Credit Reporting Act allow insurance companies to use credit information when evaluating insurance coverage.

  • Using credit wisely is the best financial strategy for maintaining a healthy credit profile. FICO provides online tips to help you improve your credit-based insurance score. For additional information visit the Insurance Information Institute.  

For more information about credit-based insurance scoring, contact NW Insurance Council at (800) 664-4942 or visit our website.

NW Insurance Council is a nonprofit, public-education organization funded by member insurance companies serving Washington, Oregon and Idaho.