When you apply for an insurance policy or submit a claim, you're probably unaware of the streams of information about you that flow between your insurance company and private businesses. Mark Twain once wrote that insurance companies are a "power behind the throne that [is] greater than the throne itself," but that was more than 100 years ago. Today, the true power lies in the hands of the database companies that sell information about you.
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From ChoicePoint: ChoicePoint Attract for Auto, known in the insurance industry as a CP-Attract Score.
From Fair Isaac Corp.: Fair Isaac, also the supplier of your FICO score, offers its insurance scores through credit agencies under these brand names:
1. Equifax: InScore
2. Experian: Experian/Fair Isaac Insurance Score at ChoicePoint
3. TransUnion: Fair Isaac Insurance Risk Score
Individual insurance companies: Some insurers have their own models for developing consumer insurance scores, such as State Farm, Progressive's A24 and Farmers Insurance Fire & Auto Combined Evaluation Tool.
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The "credit scores" used by the auto insurance industry are actually "insurance risk scores." Both scores are based on information contained in your full credit report, but they put weight on different factors in order to calculate a final score. Thus, even if you purchase your credit score from one of the major credit-reporting agencies, you still don't know your "insurance risk score."
According to Craig Watts of Fair Isaac, a provider of scores, a regular credit score weights data in order to evaluate your past use of credit. But insurance scores are used to evaluate your past use of credit to predict whether you will file future claims. So, says Watts, if you've managed your credit well, you're likely to manage your house and car well, resulting in fewer expensive claims. Insurance scores do not factor in race or income. Credit scores and insurance scores generally move in the same direction up or down as your credit history changes (meaning move up or down), but there could be cases where you have credit activity that impacts one score more than the other.
The Fair Isaac insurance score calculation puts weight on data this way:
- Payment history, collections, bankruptcy: 40 percent
- Amounts owed: 30 percent
- Length of credit history: 15 percent
- New credit applications: 10 percent
- Type of credit used: 5 percent
Most auto insurers use insurance scores to place you in a rate class (like preferred, standard or high-risk) and set a price for you within that class.
Supporters of scoring say there is a direct correlation between your score and the likelihood that you'll make a claim, but critics maintain that it permits insurers to charge higher premiums to lower income households.
Most states have laws that restrict the use of credit scores. For example, many states stipulate that insurers can't use the scores as the sole basis for setting rates or for refusing to issue you a policy or renew your policy.
If you have some unusual activity within the month before you buy auto insurance, your insurance score could drop. Insurers may then consider you a bad risk (where allowed by law) and refuse to sell you a policy, or charge you a higher premium for it. If you decrease your credit activity and wait a month to purchase your insurance, you could help your chances. Remember that there are many factors that auto insurers use when evaluating you as a customer, including your driving record, your claims history, where you live and your vehicle model.
ChoicePoint, a leading provider of insurance scores, sells ChoicePoint Attract Auto Insurance Scores, based on credit reports, that are used by insurers to help decide whether to sell you a policy and to set your rate. You can order your own ChoicePoint Attract score at www.choicetrust.com for $12.95 to check your insurance score, how it compares to other consumer and your "risk category."
ChoicePoint also sells ChoicePoint Attract with Claims to auto insurers that combines credit information and your previous claims history to predict your future claims level. (This report is not accessible to consumers.)
ChoicePoint maintains a database called C.L.U.E. (Comprehensive Loss Underwriting Exchange). The company sells "C.L.U.E. Auto" reports to insurers that contain a five-year history of claims associated with your auto insurance, including loss types, dates of loss, amounts paid, and your past and present policies numbers, claim numbers and auto insurers. ChoicePoint says 98 percent of auto insurers provide reports for the database. You can receive your "C.L.U.E. Auto Report" free at www.choicetrust.com and can dispute any inaccurate information in it, much like a credit report.
Other ChoicePoint services to insurers include motor vehicle reports and a "Current Carrier" database that lists your current insurers, coverages and limits.
The Insurance Services Office (ISO) sells insurers access to its A-PLUS (Automobile-Property Loss Underwriting Service) database, which contains three to five years worth of claims information on all types of losses. ISO says 91 percent of auto insurers contribute auto and home claims for the A-PLUS database.
The ISO touts A-PLUS information as a way for underwriters and insurance agents to determine whether to sell a policy to an applicant. You can get your A-PLUS report free by calling the A-PLUS Consumer Report Request Line at (800) 627-3487.
In addition, another product from ISO, called ISO Passport, combines A-PLUS claims reports with:
- Your motor vehicle record
- Your vehicle-registration report, such as your car's VIN, whether you have regular, dealer or vanity plates, whether the vehicle has been titled as flood damaged, salvage, etc., and other vehicle data.
- Your credit information.
- "Undisclosed-driver reports," meaning "hidden drivers" who are likely drivers of the insured car but not listed on policy applications.
ISO also sells your "credit loss history score," which combines claims information from the A-PLUS database with your credit information from TransUnion. The resulting score helps underwriters decide if they should sell you an auto policy, and at what premium.
If you think there's too much information about you for sale already and there should be some limits, note that ISO Passport's motto is "No borders. No barriers. No boundaries."
State Farm — the country's largest auto insurer — decided to use "prior loss history and certain credit characteristics" to create its own model that helps it determine an underwriting score for a policyholder applying for a homeowners or auto policy.
A State Farm spokesperson says, "It is significant that we are combining credit characteristics and prior claims history for these models and that we have developed the models using our own book of business. Our models are not designed to assess wealth, income or creditworthiness, but focus on the prediction of future insurance losses."
State Farm adds that it believes the "use of this model will lessen the extent to which those who represent higher potential risk are subsidized by those who represent lower potential risk."
The ISO maintains a giant database of more than 500 million claims, called ClaimSearch. It is not used by insurers in deciding whether to sell you a policy or set your rate, but it's used when claims are made to detect fraud and "evaluate" policyholder claims histories.
The ClaimSearch system searches the database for other claims made by the same person or business. If the ISO sees a series of claims that looks suspicious — for example, the same name appears on all the claims with a different Social Security number — the company will notify the insurance company and the insurer will investigate. The ISO also collects information about any of your claims that might have ended up in court. ISO says it receives 48 million claims annually for the database and more than 93 percent of property/casualty insurers use it.
According to the ISO, information returned by ClaimSearch can lead to the expediting of a valid claim, the denial of a claim, the negotiation of a reduced award or further investigation.
You can request a copy of the ClaimSearch data on you for $15 by calling ISO customer support at (800) 888-4476. You'll need to fill out a Citizen's Inquiry Form and provide proof of identity.
Most of the information that insurance companies collect and use for rating purposes is available from government agencies and credit-reporting companies. For example, you can get a copy of your motor vehicle report from your state's department of motor vehicles and you can get your credit history from:
- Equifax, (800) 685-1111
- Experian, (888) 397-3742
- TransUnion, (800) 888-4213
British Citizens:
Canadian Citizens: