How Scoring Works
Credit-Based Insurance Scores evaluate your credit bureau data to provide an estimation of your risk of insurance loss relative to other consumers.
To develop the bureau-based insurance risk score models, Fair Isaac follows rigorous statistical methodology and gathers data on millions of consumers and multi-millions of dollars in claims. In the model development process, advanced technology is used to empirically determine the correlation of hundreds of credit variables (for example, the number of 60 day delinquencies a consumer has in his or her credit file), with later claim performance.
Higher insurance scores indicate lower risk to insurers.
The variables determined to be most predictive of future losses are used to build the models, which are then deployed through the credit reporting agencies (some models are also available via ChoicePoint®). The final models evaluate an individual’s credit report to forecast the likely risk they represent. Higher insurance scores indicate lower risk to insurers. To ensure higher accuracy, many separate models are built for the major types of both property insurance and auto insurance.
Insurers that choose to add credit to the mix of information they evaluate when making decisions can purchase a score from the credit reporting agency. When an insurer purchases a score, the bureaus credit reporting agency runs the new applicant’s or existing policyholder’s credit file through the scoring model, and then forwards the resulting score and associated reason codes (that explain the major factors in the report that influenced the score) to the insurer.
