What is an Insurance Score?

Answer:
An insurance score is a numerical value based on insurance applicants’ credit history.

Credit histories have been used for decades to help determine an applicant’s risk. The insurance score gives insurance underwriters a snapshot of how an applicant manages their financial affairs which has been found to be a good predictor of claims. Statistics show that those with good insurance scores have fewer claims than those with poor insurance scores.

With the insurance score in hand, an underwriter has a tool to use to determine if a person represents a low or high insurance risk. Depending on the level of risk, the premiums will reflect the risk the insurance company is assuming.

When an insurance company purchases an insurance score from a credit reporting agency, the insured’s credit file is run through a scoring model which weighs various factors and computes a final score. Along with the final score, the insurance company receives a report detailing the reasons for the score.

Insurance companies use an insurance score by Fair Isaac. The different credit reporting agents refer to this score by different names: InScore (Equifax), the Experian-Fair Isaac Score (Experian), and Fair Isaac Insurance Risk Score (TransUnion).


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