Fico Insurance Risk Scores

Many people are now aware that their credit score is used by the majority of insurers in determining the cost of their insurance premiums, both in auto and property insurance. What you may not be aware of is that the Fair Isaacs Corporation sells a Fico Insurance Risk Scores analytical model to insurance companies. If you thought that insurers just looked at your Fico score as an additional source of pricing your policies then think again, as Fair Isaacs actively sell predictive analysis tools to help insurance underwriters accept or decline your insurance application.

The majority of insurers use the Fico score within their underwriting process. The Fico Insurance Risk Scores has proven that those who handle their finances responsibly are a better insurance risk and are more profitable customers who make less insurance claims. There is a validated correlation between financial responsibility and good maintenance of property and autos. Thus insurers are able to make more effective decisions based on a future loss ratio.

Another benefit to insurers who use Fico insurance risk scores is they are able to improve the retention levels of the customers they favour, and target them with additional products and cross selling. It allows for more profitable business to be conducted.

There are a number of fico insurance risk scores available to insurance companies:

1.  Experian/Fico insurance score: for auto and property at Experian.

2. TransUnion: for auto and property.

3.  InScore: for auto and property at Equifax CPLS:

4.  Canadian property loss score at Equifax in Canada.

5.  Property Predict score from Fico and Millennium information services.

Each of these different models of Fico insurance risk scores are based on information held on consumers by the three main credit bureaus. Thus if consumers don’t use credit in their daily lives, as 25% of the American population does not, then they are deemed more of a risk when it comes to their auto insurance. 

Insurance customers with spotless driving records and never a ticket to their name are considered riskier if they once had a temporary financial problem, than the customer who pays all their bills on time but constantly gets stopped for speeding.

The Property Predict score does take more into account than just credit scores as it contains property data which incorporates high risk factors connected to properties which have been assessed by surveys.

More and more areas of a consumer’s life are being affected by their credit scores but it is naïve to think that insurers just call up your credit score and factor it in to the underwriting process. The compilers of your Fico credit score actively encourage insurers to make use of consumer’s financial histories by selling them the Fico Insurance Risk Scores analytical models.