One number attached to your history of personal responsibility (or lack thereof) but having nothing to do with your driving prowess could be wreaking havoc with your insurance rate. It’s not like anyone needs one more reason to start valuing responsible debt management and credit usage.
It may not seem fair on the surface, but insurance providers are hardly the only people utilizing your rap sheet with major credit bureaus to interpret your trustworthiness. Roughly 92 out of 100 insurers polled by the Conning & Co. research firm admitted to credit history being a key criterion in deciding whether to issue a policy and to determine an appropriate premium. Homeowners insurance underwriters take credit-worthiness into account right alongside a home’s age, the state of its roof, known losses, and the home’s general construction type.
Though it’s a practice widely contested by consumer advocates, state lawmakers and even insurance regulators as being widely unfair. Nevertheless, it remains the status quo: how you manage your money is seen as a reflection of how you manage yourself.
- RENDERING JUDGMENT
To be fair, these credit-based assessments don’t always stem from credit reports themselves. Even more stressful to consider, they tend toward simply obtaining your major credit bureau scores and compare and contrast those alongside Fair, Isaacs & Co. three-digit scores, FICO “insurance scores” and often proprietary formulas to take a measure of an applicant’s stability.
Credit scores aren’t the only indirect criterion considered. Insurance providers will also often think carefully before insuring drivers who have recently gone through catastrophes within their personal lives, lower-income drivers, and certain minorities. Insurers often place a great deal faith data drawing a conclusion about potential customer’s likelihood of filing a claim based on the statistically predicted likelihood of filing a claim – not to so much the reality that an accident-prone driver with sterling credit might pay less than a demonstrated credit liability who has never had so much as a parking ticket.
Not to mention, Casual Actuarial Society research concluding that safe drivers with bad credit have worse loss ratios than spotty drivers with high scores.
- WHAT TO DO?
For the time being? Nothing.
The process of wiping out debt and rehabilitating credit is not the time to shop around for a new insurer. Once your credit improves into the “Good” or “Excellent” range, reach out to your insurer and try negotiating a better rate. While you’re at it, look into bids from competing insurers. You may find someone who willingly rewards having a level head for personal finances and offer you a significantly better rate.
Unfortunately, keep just one more reality in mind: even if you come across an insurer that willingly shares your insurance score with you, that doesn’t guarantee a complete understanding of your rate formulation. Many insurers will still cautiously guard the nuances of how they weigh your insurance score against your credit and other criteria.
All the more reason to contact us today for a free, insightful consultation.