Insurance Driver Scoring: Common Approaches and Their Disadvantages

The number of cars on the roads increases dramatically, and auto insurance grows in demand as well, being required by law. The insurance price differs depending on your age, gender, location, and credit score. According to statistics, the younger the car owner, the more expensive auto insurance is. Poor credit is another factor raising the price of your insurance.

This article explains how to select the best auto insurance. Our specialists at Wellnuts can assist you in the calculation and improvement of your auto insurance score. We can also be your to-go place if you need assistance with insurance scoring system development as the Wellnuts team has extensive expertise in this domain.

Understanding Auto Insurance Score

The first thing to find out is what is an auto insurance score. Knowing this concept is vital to understanding how insurance companies operate and what to expect when applying for car insurance. An auto insurance score is factor companies use to predict risks and determine the rate of the insurance policy.

The insurance score is based on several factors, including your driving history, previous claims, and credit history. Having a good driving history with no or few accidents and claim filings increases your chances of getting good rates.

Principles of Insurance Scores Calculation

If you wonder how to check an auto insurance score, pay attention that auto insurance companies consider the following factors while calculating the insurance score:

• Claim history
• Location
• Type of vehicle
• Credit reports
• Gender
• Marital status
• Education
• Occupation
• Other drivers in the household

Poor driver scoring, many claims in the past, and risky credit history affect your insurance score.

The credit-based insurance scoring is the most controversial and widely used method for calculating insurance scores. If insurers see you pose risks to their company and will not be able to pay bills on time, they will set higher insurance rates.

Each company calculates insurance scores differently and uses third-party vendors. They may request a calculation from companies like Fair Isaac Corporation (FICO), LexisNexis, and TransUnion.

Insurance scores they provide range from 300 to 997, and their benchmark for a good score is 700. But never focus on one quote and try to get many of them when applying for an insurance policy.

If you consider developing the custom insurance scoring system, don’t hesitate to contact WellNuts. We’ll help you create an innovative solution that would successfully serve the needs of end-users while helping you meet your business goals.

Approaches to Insurance Driver Scoring

Insurance companies rely on different factors and big data analysis practices when calculating insurance scores. The agency’s approach has its pros and cons, so let’s find out more about the auto insurance score range.

Advantages

Different companies may use their own methods and metrics, so your score can be higher depending on their approach. If you have a poor credit history, avoid companies relying on this factor, and your insurance price will be more manageable.

Disadvantages

There are many risks for clients who want to apply for auto insurance. Many states do not neglect your personal information and may check everything they find appropriate: from your marital status to the number of loans. The problem is that insurance scores are unavailable on the web since companies perform their driver scoring, and their evaluation may be quite subjective.

Auto Insurance Score & Credit Score Connection

An insurance score is different from your credit score. An insurance score predicts the likelihood of future accidents or insurance claims. A credit score is based on your ability to repay the borrowed money. It is based on your income, job history, credit history, etc., but never on the insurance score.

Credit-based insurance scores are grounded on such factors as:

• Past payment history
• Level of debt
• Length of credit history
• The number of credit inquiries
• Open liabilities
• Liability defaults
• New credit and their types
• Diversity of your credit sources

Analyzing all these data defines the price you will pay for coverage. As you see, credit history is a crucial factor in determining your insurance score. Insurance providers consider your credit history and set low insurance rates for drivers with poor histories.

Insurance providers try to predict if they will lose money accepting you as a customer. Your insurance score will be high if you have a strong credit history with no credits or late payments.

Credit-Based Insurance Score vs. Credit Score

While insurance and credit scores influence your insurance rate and policy, there is a difference between them.

Auto insurers use your credit score to evaluate your application and determine rates. It’s prohibited to use this personal information as the only criterion for setting insurance scores. Many insurance companies use credit-based auto insurance scores, so move on to find how to improve them.

Ways to Improve Auto Insurance Score

We cannot change past accidents and cancel prior claim filings, but improving the credit score is an effective solution to mitigate all those factors and get a good insurance score. So there are several tips for cutting your insurance cost:

• You should reduce your credit utilization and keep it below 30%
• Make on-time payments so that companies see you are a reliable client
• It’ll be great to diversify your credit by paying it from different sources. But be prudent, as it may cause several credit inquiries
• Keep your accounts open to show your financial responsibility
• Get regular credit reports and check if the information is correct and define your current credit score

There are also some tips to help you reduce car insurance costs. To get the best auto insurance policy, apply to several companies and compare their conditions and prices. Do not be afraid to ask for car insurance discounts, as agencies may have different loyalty programs to attract clients.

You can also try to drive less and adopt careful behavior on the road. And do not forget to review your insurance policy regularly to check if you pay for some unnecessary coverage types.

Improve Your Auto Insurance Score

Many factors are out of our control, but you can still improve your driving score insurance. Have a short credit history and make regular payments to show companies can rely on you.

Do not wait to contact us and the specialists of Wellnuts will provide a range of services to analyze your data and help build your own insurance scoring platform!

Ready to talk? Contact us: ask@wellnutscorp.com