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How Your Credit Score Affects Your Insurance Premiums

March 17, 2010

Insurance companies–Progressive was the first– discovered several years ago that people who are responsible about their credit are usually responsible about other things, including  driving a vehicle. 

Believe it or not,  credit  is a remarkably accurate predictor of future driving incidents. It doesn’t matter how much money you have, your race, religion, where you live or your marital status. It just happens that people who pay their bills on time and are careful about their credit also tend to be careful about driving. They also tend to be more responsible home owners, protecting their investment by keeping up on a home’s maintenance needs and filing fewer insurance claims.

Since that discovery was made, most insurance companies have started including credit history–along with other factors such as driving history and type of vehicle for auto insurance, and a property’s characteristics and past claims for homeowners insurance – into their underwriting systems. It has become part of the formula companies use for classifying policyholders and setting insurance rates.

We encourage all our clients to be financially smart and savvy. This includes suggesting they check their credit histories from time to time to know how they rank and correct any errors. In the event that a person’s credit history has room for improvement, we can point you toward available resources.

Realizing that taking good care of your credit history is important. So too is recognizing that insurance companies differ widely in their approaches to credit, driving history and so on.  Us agents call these rating systems the ‘black boxes.’  Long gone are the days of simple, straight forward rate books and territories.   Today, all insurance companies mine their customers loss history to develop very complex rating systems. 

If you live in Oregon or Washington and want to see these company black boxes in action, go to our website.  In less than 10 minutes you can have quotes from:  Safeco, Progressive, Travelers, The Hartford, Allied and Mutual of Enumclaw.  

Questions or comments please give me a ring at 503-357-7111 x-7716 or send me an e-mail at brian@pacificinspartners.com

Thanks!

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