What is an insurance score and how to check it?

We've all heard about checking your credit score periodically and the benefits of doing so. However, no one talks about insurance scores.

What is an insurance score?

An insurance score is a tool used by insurance companies to help evaluate the risk associated with a prospective client or current insured. The score is composed of public information that is then analyzed to create a "score". The score is most often used by insurers to predict your odds of filing a claim.

Actuaries have studied these scores over the years against historical claims to try and predict how an individual's insurance score may translate into risk. For example, actuaries may conclude that an insured with a higher credit score may be less likely they are to file a claim. With a higher credit score, the insured may have more access to funds and therefore may not need to file a claim. Where a lower credit score may indicate less easy access to cash and therefore a higher probability that when the unexpected happens, the insured will need the insurance company to assist in indemnifying the insured.

Insurance companies are regulated by the state and therefore, they must adhere to very strict guidelines when setting rates. So rest assured, if a company's actuaries make a distinction that effects rates, they are required to have the actuarial data to back up their decision. The insurers must take care consideration to ensure they are basing their rates off of actuarial data and not making any discriminatory decisions.

How do I check my insurance score?

While insurance companies may use multiple data sources to create their credit scores, one of the sources we see used frequently is LexisNexis. You can request your report from LexisNexis for free by visiting https://consumer.risk.lexisnexis.com/ . LexisNexis describes their process on their website to give you more information. To request the report, click on the red button that says "Request a Consumer Disclosure Report".

Once you receive your report, be sure to look it over. If you see information that does not apply to you, there is also a process to dispute that information.