Unlocking the Mystery: How Credit-Based Insurance Scores Impact Your Premiums

Understanding Credit-Based Insurance Scores

Consumer skepticism about the connection between credit history and future insurance claims appears to decline when the predictive power of credit-based insurance scores is explained to them, a recent study by the Insurance Research Council (IRC) suggests.

The Role of Credit Scores in Insurance Premiums

This is just one of the IRC’s encouraging findings.  Others include: Consumers are generally knowledgeable about credit, credit histories, and credit scores. Nearly all believe it’s important to maintain good credit history, and most believe it would be easy to improve their credit score. Among nearly all demographic groups, paying for auto insurance is not considered a burden for most households.

Addressing Concerns and Promoting Fairness

Concerns have been raised about the use of credit-based scores and certain other metrics in setting home and car insurance premium rates. Critics say it can lead to “proxy discrimination,” with people of color – who are more likely to have less-than-stellar credit histories – sometimes being charged more than their neighbors for the same coverage.