Standards for Use of Credit Information or Insurance Scores
Credit history means any written or other communication of any information about individuals by a consumer-reporting agency that:
- Bares on a consumer’s creditworthiness, credit standing, or credit capacity.
- Is used or expected to be used, or collected in whole or in part, to serve as a factor in determining eligibility or rates for personal insurance.
Insurance scores are confidential rankings based on credit history information. The score is developed from specific credit information that reflects credit management patterns such as collections, bankruptcies, outstanding debt, length of credit history, types of credit in use, and the number of new applications for credit. This is a measurement of how a person manages financial affairs and is not based on individual income.
Insurance scores do not include the following information: ethnicity, nationality, religion, age, gender, marital status, familial status, income, address, or handicap.
Insurance scores provide insurers with additional predictive information that is distinct from other rating variables. Insurance scores predict the average claim behavior of a group of people with essentially the same credit history. People with low insurance scores tend to file more claims. Over the years, Western National has been watching the use of insurance scores as a rating tool by many other insurance companies and has studied the powerful correlation between credit history and potential risk. Credit information significantly improves insurers’ ability to make accurate predictions about which consumers are likely to experience claims. This results in a more accurate cost of coverage based on a customer’s claim potential. That means an improved overall pricing system and a reward of lower premiums for lower risk customers.
Although both scores use credit information, insurance scores are developed using a unique mathematical formula that helps insurers predict the likelihood of insurance claims. Credit scores are the scores used by banks and other financial institutions to help determine both eligibility for and interest rates of loans for cars, houses, and credit cards. As insurance scores and credit scores are designed to measure different outcomes, different results may be shown.
New Applications – Personal information, including credit information, is gathered when applying for personal insurance. Western National requires the policyholder’s signature on the application and the notice of information practices (both documents contain the authorization to collect and disclose personal or privileged information).
Iowa – Western National will reorder an insurance score every three years, and any change in the discount will be applied upon renewal. How will credit history be used? Western National uses credit information as one of several tools to underwrite an account. Credit history is not used as the sole reason for declining an application. Other underwriting reasons for declinations include, but are not limited to, poor claim experience, poor property condition / maintenance, ownership of animals, unacceptable liability exposures, unacceptable violations / loss history, excessive mileage driven to work / school, previous poor payment history with Western National, etc.
Western National will not decline coverage of personal insurance if there is an absence of credit history or if credit history is unable to be determined with complete and accurate information.
Western National also will not use the following types of credit history to decline coverage, calculate an insurance score, or determine your rate: credit inquiries not initiated by the policyholder, inquiries identified on credit reports relating to insurance coverage, multiple lender inquiries identified as being from the home mortgage industry or from the automobile industry and made within 30 days of one another, and the total available line of credit (however, the total amount of outstanding debt in relation to the total available line of credit may be considered.)
Although both scores use credit information, insurance scores are developed using a unique mathematical formula that helps insurers predict the likelihood of insurance claims. Credit scores are the scores used by banks and other financial institutions to help determine both eligibility for and interest rates of loans for cars, houses, and credit cards. As insurance scores and credit scores are designed to measure different outcomes, different results may be shown.
After the insurance score is obtained from LexisNexis, a provider of consumer reports, the insurance score will be translated into the appropriate tier and insurance score band. The highest insurance score obtained on the named insured, spouse, parent of a youthful (if resident of the same household) shall determine the insurance score band, tier, and applicable factor. The insurance score discount will then become a part of the algorithm used to determine the insurance premium.
No. Western National understands the sensitive nature of credit information and keeps insurance scores strictly confidential. Agencies, however, will be able to see the tier the score falls into.
An insurance score is a ‘snapshot’ of an individual’s credit bureau report information at a particular point in time. Scores and credit can be improved by paying bills on time, keeping balances low on credit cards, and applying for and opening new credit accounts only as needed. Scores change gradually according to how credit is handled. For example, past credit problems impact the score less as time passes. Credit history changes as new information is added to credit bureau files. Therefore by taking the time to improve credit, policyholders can qualify for lower insurance premiums.
Checking credit reports periodically is beneficial. Credit reports contain information that identifies an individual’s debts, payment history, tax liens, bankruptcies, credit report inquiries, and accounts referred to collection agencies. Equifax, Experian, and Trans Union maintain credit reports. Should there be an error in a credit report, the credit bureau should be contacted. If a revised insurance score is reported to Western National resulting from a discrepancy or error in credit history, the factor will be revised with the premium adjusted at inception of the affected policy or upon the renewal policy.
For more information about credit reports, contact:
Equifax (www.equifax.com)
For a copy of your report, you can call (800) 685-1111.
To dispute information in your report, write to:
P.O. Box 740256
Atlanta, GA 30374
Experian (www.experian.com)
For a copy of your report, you can call (888) 397-3742.
To dispute information in your report, write to:
P.O. Box 2002
Allen, TX 75013
Trans Union (www.transunion.com)
For a copy of your report, you can call (800) 888-4213.
To dispute information in your report, write to:
P.O. Box 2000
Chester, PA 19022
Each of the nationwide consumer credit reporting agencies listed above are required to provide a free credit report, upon request, once every 12 months. The web site is www.annualcreditreport.com.
LexisNexis is a reseller of credit information. LexisNexis provides a system for Western National Mutual to access an individual’s credit report. Once the LexisNexis report is obtained, a score will be systematically calculated and returned to the insurance company to assess the risk and assist in making an underwriting decision.
LexisNexis is considered a Consumer Reporting Agency under the Federal Fair Credit Reporting Act and its state analogues (“FCRA”), but LexisNexis is not a credit bureau or insurance company. LexisNexis does not make credit decisions or determine insurance underwriting guidelines or insurance premiums. LexisNexis role is to supply information to the insurance carriers, which the carriers can review in order to assist them in making an underwriting decision.
The contact information below can be used to obtain LexisNexis report copies.
LexisNexis Consumer Service Center
PO Box 105108
Atlanta, GA 30348-5108
(800) 456-6004
www.consumerdisclosure.com
Credit reports and ATTRACT ONE insurance scores can also be ordered via the www.choicetrust.com web site.