Fairness in Insurance Rating Factors: Consumer Perspectives and Recent Trends

Consumer Perceptions on Insurance Rating Factors

A recent survey by the Insurance Research Council (IRC) reveals that most consumers find the majority of personal insurance rating factors used by insurers to underwrite and price homeowners and auto coverage to be fair. However, there is some variation in which variables they consider fair. Overall, consumers were more favorable toward factors they perceived to be directly related to the risk of the insured property, such as the condition of the home, cost of rebuilding, miles driven, and vehicle information. They were less likely to rank fair on aspects connected to the insured’s personal profile.

Fair and Unfair Factors in Auto and Homeowners Insurance

The study, titled 'Public Perceptions Regarding the Fairness of Insurance Rating Factors,' focused on homeowners and personal auto insurance. IRC found that all 19 homeowners insurance rating factors were assessed to be fair by most respondents, and the majority deemed 10 of the 14 personal auto factors. Among personal auto factors, those most likely to be deemed fair included traffic conviction record, driver’s loss/claim history, and driving behavior data from telematics. However, the personal auto factors that were least likely to be considered fair were education level, marital status, and gender of the driver.

Expanding on Consumer Attitudes and Practical Advice

Previous IRC research that focused on consumer attitudes about the use of credit history as an insurance rating factor found that skepticism about the link between credit and future insurance claims declines when the predictive power of credit-based insurance scores is explained to them. In light of recent trends, it is crucial for consumers to understand the rationale behind these rating factors. For instance, a study by the Consumer Federation of America found that drivers with poor credit scores pay, on average, 67% more for auto insurance than those with excellent credit. Therefore, maintaining a good credit score can significantly impact insurance premiums.

To conclude, while consumers generally support the fairness of insurance rating factors, understanding the specifics can help in making informed decisions. Regularly reviewing your credit score and maintaining a good driving record can help in managing insurance costs effectively.