The use of insurance scores: Under Federal law, companies may use consumer reports such as credit reports to help determine policy rating and eligibility. The following information explains how the use of insurance scores helps us determine program eligibility as well as the premium an individual will pay.
Why we use insurance scores
Insurance scores have proven to be effective predictors of insurance losses. This is important to you as a customer, because these scores help the company offer the best coverages and prices to consumers who are less likely to incur numerous losses, and keep the policy rates competitive.
Insurance scores are not the same as credit scores
Although the insurance score is based on credit information, it is important to understand the difference between insurance scores and credit scores:
- An insurance score measures the potential for future loss
- A credit score predicts how likely someone is to repay a loan or other credit obligation
- Because they have different focuses, credit-report information is used differently to calculate the credit score than it is to calculate the insurance score
How insurance scores are calculated
An insurance score is developed from a mathematical formula that weighs and measures the credit information available at a particular point in time. State and federal laws permit companies to consider factors such as payment history, length of credit history, delinquent accounts, the number of collections, bankruptcies, the number of applications for new credit, and outstanding debt and account balances. These factors help identify credit patterns that indicate the probability of future losses. When Foremost uses models or formulas owned by third party vendors, Foremost does not have access to the formulas that were used to determine the scores.
How we use insurance scores
At Foremost, the insurance scores are divided into varying rating levels. These rating levels are based partly on the insurance score, but this score is NOT the sole factor in determining the premium. Traditional rating factors depend on the type of policy involved and may include:
- Coverages the customer has selected
- Limit amounts chosen for those coverages
- Motor vehicle driving records
- Claim history.
If you have not received our best rate, you will receive a separate notice in your policy packet explaining this, in accordance with the Fair Credit Reporting Act.
Frequency of insurance scoring
Foremost does not use insurance scores for all products. For those products that do apply insurance scores, Foremost obtains the score at the time the customer applies for insurance. It is possible that we may obtain a new score at renewal, or we may continue to use the rating level determined when the policy was first issued. This depends on the state laws and regulations and the design of the state-specific program. Many states require that we review the insurance score at least once every three years.
Little or no credit information
The lack of credit history or the inability to calculate an insurance score will not be the sole factors used to determine premium or to deny, cancel or non-renew a policy.
Corrections to your credit information
If you find an error on your credit report and have it corrected through the reporting agency/credit bureau, that agency/bureau will send you a document stating the correction has been made. After you receive that document, you may call your agent or representative to request that Underwriting re-score your policy. Please be sure to have the correction verification document and your policy number when you call.
Improving your insurance score
If you have received our notice called "Important Information about Consumer Reports — Adverse Action Notice," please take a moment to read the section titled "Further Explanation of Insurance Score Reasons." This section gives important information regarding the specific factor(s) that have had the most impact on your insurance score, as well as general information on how you might address each factor.
Inquiries for insurance scoring
Foremost's request to view your credit information for insurance scoring purposes is considered a "soft inquiry." This means you may see our inquiry listed on your report; however, our inquiry will not have any affect on your insurance score.
Customer satisfaction is important to us. If you have any questions, please contact the agent or representative shown on your Declarations Page. Your representative will be happy to review your policy and coverages with you.
For further information on this topic, you may want to visit the following sites: