Why do insurance carriers take a person’s credit into account when determining the premium?
Insurance companies run credit checks on applicants because studies have shown that a person’s credit history is a good predictor of how many claims that person will have, which ultimately determines if the account will be profitable for the carrier. Actuaries have found a strong correlation between credit history and insurance claims, and they have been taking credit history of the applicant into account for some time in most states.
Insurance rates are not purely calculated based on credit history. There are other variables such as your county and zip code, the type of construction, roof, age, square footage, etc. The goal of getting all of this information is to correlate the insurance premium rate as closely as possible with the actual cost of potential claims.
There has been a noticeable shift toward lower rates that can be pinpointed to using credit along with many other rating factors. In the past, most auto insurers based premiums on a few rating factors like type of car, place of residence, age, marital status and driving record. Now most companies focus on at least 30 or more factors. The overall effect of running credit and taking more information into account has actually brought average premiums down for most people.
If you have poor credit, we do have carriers that still do not credit check, although the industry has been moving more and more in that direction. We will do our very best to find the best coverage for your client at the best rate.
For more information about insurance for your home, investments, vehicles, or business,
contact Judge Fite Insurance Agency today at email@example.com or 214-446-2572.