Credit Scores Accurately Predict Auto Insurance Claims

Unknown to some auto insurance buyers, their credit scores directly impact what they pay for auto insurance protection. And a study by the federal government affirms credit-based scoring is an accurate predictor of the likelihood someone with file an auto insurance claim.

Most auto insurance companies use from consumer credit reports to predict the likelihood of someone filing an auto insurance claim when setting rates. And a recent study conducted by government insurance regulators, universities, independent auditors and insurance companies indicates credit-based scoring is a very accurate predictor of potential risk.

Consumer credit scores are “predictive of the number of claims consumers file and the total cost of those claims,” and “scores also may make the process of granting and pricing insurance quicker and cheaper, savings that may be passed on to consumers in the form of lower premiums,” the Federal Trade Commission reported in its 2007 study entitled, “Credit-Based Insurance Scores: Impact on Consumers of Automobile Insurance.”

Most states have enacted laws supporting the use of credit scores for determining auto insurance premiums, and the federal Fair Credit Reporting Act allows it while at the same time offering protection for consumers.

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