Your Auto Insurer Knows Plenty about You

Your auto insurance company probably has a lot of your personal information, and that`s not necessarily a bad thing. For instance, auto insurers get a hold of your driving record, credit history, and other info to use in making decisions such as whether to cover your vehicles and how much to charge you for coverage.

Many insurers use credit information to determine your risk score. You`ll likely get more affordable auto insurance if you have a good credit score, a history of paying bills on time and no bad debt. Auto insurers see a direct relationship between your risk score and the chances of you filing a claim against your policy. Conversely, an applicant who has a history of being late on bill payments and who often opens and closes savings or credit accounts wouldn`t be as good of a candidate to receive the lowest rates available from certain providers.

You won`t be able to obtain your insurance risk score, but you can assume that it`s comparable to your credit score.

Providing insights on credit scoring/rating are  industry experts Carolyn Gorman, Dick Luedke, Nichole Mahrt and Dave Snyder. Your credit rating may affect what you pay for auto insurance, so keep tabs on it, recommends Gorman, vice president of the New York-based Insurance Information Institute. Gorman believes that credit makes policy rates more accurate, fair and objective. The use of insurance scoring varies from state to state and company to company, says Gorman, but the insurance industry believes that drivers with long, stable credit records have fewer accidents than drivers who don't.

Gorman says that there are various Internet services that permit consumers to check their credit rating and offer suggestions on how to improve their scores.

"Motor vehicle records are invaluable to a company in the assessment of auto insurance risk, and to the extent they are not accurate, we are unable to assess that risk as well as we might otherwise be able to," says State Farm spokesperson Dick Luedke.

Credit scoring is another tool that enables insurers to estimate risk, according to Nicole Mahrt, western regional public affairs director for the American Insurance Association. "It helps them accurately price the product for you so that you pay a premium that reflects your individual risk characteristics."

Mahrt`s AIA colleague, Dave Snyder traveled a different road on the topic. "Because driving experience is so important as a predictor of insurance risk, insurers try to gather as much pertinent information as they can about the drivers, and that would include state motor vehicle records and related data from other sources."

Word of warning from insurance trade group executive Daniel Kummer. "You could end up with legal difficulties or get in trouble with your auto insurer by leaving citations or convictions off an auto insurance application. Doing that could make you vulnerable to fraud charges. And misrepresenting your driving record on your auto insurance application by leaving out reference to citations for DUI or other moving violations could give the insurance company grounds to cancel your policy," warns Kummer, director of auto insurance for the Property Casualty Insurers Association of America in Des Plaines, Ill. "And if you make such an omission in your application, you might get caught by the insurer, and it`s likely your rates will go up as a result."

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