June 13, 2007

How Insurance companies price your Car Insurance

Insurance can be an adversarial business relationship, unfortunately. In some circumstances, the more your insurer knows about you, the higher the rate they will charge you. This gives them every incentive to ferret out information pertinent to your insurance risks -- or what they believe affects your insurance risks, anyway.

A Consumerist article gives insight into the privacy implications and pricing strategy of auto insurance.

Note that insurance companies access the following databases to actuarially determine liklihood of an insurance claim: CLUE report, credit report, and driving history.

As with credit reports, a critical source of information is what you tell the insurance company:

Driving histories go back 36 months, except in New York (which is 40 months). Your history is composed from three reports; your MVR or Motor Vehicle Report, the state database of your ticketed driving history; your CLUE report, a collection of previous insurance companies reports stating the numbers of claims you've had, and YOU. If you say you got in an accident, were never sited for it and never claimed it on your insurance, but you still tell us, it'll be put on your record with an approximate date.

Credit score and insurance rates

It is illustrative how your credit report affects your insurance score, and thus your insurance rates. By 2001, 92% of insurers were considering credit scores when quoting insurance.

Remember that information you give to an insurance company may well end up on your credit report. Along with the usual distinguishing characteristics (name, date of birth, SSN or other national number), insurers will likely report your submitted information to the credit reporting bureay. This could happen even if you're just getting an insurance quote, and needs to be taken into account if you're keeping your street address confidential.

Complete truthfulness doesn't always pay when it comes to dealing with insurers who will collect every personal detail to accurately assess you with their actuarial tables.

No comments: