We get calls inquiring about whether credit is involved in determining your insurance premium all the time. The short answer is yes. Insurance companies take many different factors into consideration when assigning rates. One of these factors is your credit score. Insurance companies use a third party like Comprehensive Loss Underwriting Exchange (CLUE) for reporting.
The insurance companies compile all the different factors and then assign an insurance score. Your insurance score is NOT your credit score though it sometimes mimics the look of a credit score depending on the company.
Your insurance score can also include loss history, cancellations on file and more. This is why we don’t ever recommend letting your policy lapse even when it is done intentionally. (If you want to discontinue a policy, you should always follow the proper protocol and submit a signed cancellation so that your insurance score will not suffer.)
The assumption, based on years of statistical data, is that a lower credit score results in a higher risk client. We know that this is not always true in every single case. Insurance companies are answering this concern by offering telematics devices that track an individual’s driving behaviors.
Monitoring your credit score can help you out in many areas. Insurance is only a small portion of that; however, it is a very important portion. It is important to note that an insurance company running your credit report will not negatively impact your credit score. You can reduce your credit score by reducing your debt and paying your bills on time so that the money is received on the due date.