It may not sound significant, but an insurance score is actually something consumers should be aware of. Top financial experts are using the term ‘insurance score’ to talk about a new way insurers are defining risk.
How an Insurance Score System Works
Insurers, including auto insurance companies looking for car insurance information, can use things like your personal credit history to affect insurance rates, and even decide whether or not to cover a driver or household. This makes getting car insurance a lot harder for those who may have made some bad financial decisions in the past.
Additional Insurance Score Reports
Another popular tool to measure insurance scores is called a C.L.U.E. report: with it, insurers can see your history of making claims in the past. All of this is used in an ‘actuarial’ way to make a risk assessment on a person according to their financial history. Some consumers have reported problems with “false flagging”, where bas data on a CLUE report causes an insurer to drop a policy or raise premiums.
The new system of insurance score risk assessment is very controversial. A lot of consumer advocates are speaking up against a system that makes your auto insurance rates (and other kinds of regular costs) dependant on your financial history. Depending on who you talk to, making everything in our society credit-based may be seen as unfair and discriminatory. Read up on new insurance score systems to get your own opinion of whether or not these new financial strategies go too far.