If you’re like most Americans, you’ve probably got a ballpark idea of your credit score. Although you might not be able to recite your three-digit figure from memory, you know what to expect when lenders take a look.
Say Insurance is betting, however, that you don’t know about another three-digit score with a similar impact on your financial life: your auto insurance score. As part of its “car insurance made simple” mission, the division of Shelter General Insurance Company is helping policyholders understand how actuaries use auto insurance scores to set rates and provide discounts.
What Your Auto Insurance Score Says
Just as your credit score suggests to lenders how likely you are to repay a debt, your auto insurance score helps signal to insurance providers how likely you are to have a claim. But while many financial services firms help customers understand their credit score, Say Insurance is among the industry’s first providers to share insurance scores.
Why is Say Insurance sharing what had, until recently, been something of an industry secret? “Clarity and transparency are our company values,” explains Marc Deiter, director of Say Insurance. “We couldn’t honestly say we’re living up to them if we didn’t give that visibility to our customers.”
Say Insurance uses insurance scores, which are calculated by LexisNexis, when aligning coverages and costs. To calculate an auto insurance quote, Say considers factors such as an applicant’s insurance score, driving record, Comprehensive Loss Underwriting Exchange (CLUE) report, and risk-related characteristics.
“Think of your auto insurance score as our way of getting to know you as a policyholder,” Deiter suggests. “We know driving records don’t tell the whole story. Your insurance score fills in the financial blanks.”
Those “financial blanks” aren’t necessarily the same ones that factor into your credit score, though. Whereas your credit score takes into account factors like your debt-to-income ratio, work history, and repayment ability, your auto insurance score is less concerned with what’s in your financial accounts and more interested in how you interact with them. Your insurance score looks at metrics like age of financial accounts, payment history, and credit utilization.
There’s also, Deiter points out, one other important difference between insurance scores and credit scores. “Lenders can deny you a loan if your credit score is poor, but we’ll never refuse you coverage based on your auto insurance score,” he says.
Improving Your Insurance Score
Just because Say Insurance doesn’t decline prospective policyholders based on their insurance score doesn’t mean there’s no reason for customers to raise it. Because customers with lower auto insurance scores represent greater risks than other policyholders, Say and others often charge higher monthly premiums to individuals with lower scores.
So where should you start? Begin by checking your insurance score. Although Say Insurance provides the figure alongside all its auto insurance quotes, it also offers a free online tool so anyone can check their score.
If your score is between the neutral mark of 670 and the maximum of 997, great news: You’re a better-than-average bet for insurers. But if your score is 670 or less — and particularly if it’s lower than 500 — there are a few things you can do to improve it.
First, request your credit score report, which you’re allowed to access for free once per year from each of the three nationwide credit reporting companies. Check for inaccuracies, such as supposedly late payments you’re sure you made on time, and dispute any you find. If you can’t dispute a penalty, rest assured that it will eventually fall off your record. Then, focus on paying down credit balances and making on-time payments moving forward.
Beware, though, that the process of strengthening your auto insurance score takes time. That’s why Say Insurance intentionally reduces its impact on policyholders’ plans. “The insurance industry should know better than anyone that accidents happen,” notes Deiter. “Particularly for our loyal customers, we try to level the playing field.”
Although Deiter admits that Say Insurance leans less on auto insurance scores after the initial quote, he points out that Say adds points in 50-unit increments with each renewal. After three years with Say Insurance, for instance, a customer’s Say score could exceed their LexisNexis insurance score by 300 points.
Two Scores, One Picture
Although it’s certainly possible to have a high credit score and a low auto insurance score, or vice versa, the two typically track together. Financial responsibility is so correlated with responsibility on the road that drivers with poor credit scores sometimes pay triple what their peers do.
Deiter adds that by showing consumers their auto insurance score, Say Insurance hopes to help them take control of their wider financial life. “A good driving record is only half the story,” he says. “We want everyone to see how their financial actions impact other areas of their life, like their insurance policies.”
You might not know your auto insurance score, but insurers sure do. Given its importance on your financial life, it’s time you found out — wouldn’t you say?