Thursday, July 02, 2009

Insurance Scores: less well known than FICO: learn about them!

Besides your credit score (such as FICO), another “measure” that can affect “your” life could be your Insurance Score, when you go to purchase homeowner’s or auto insurance. It’s not clear that it makes as much difference with renter’s insurance. I’m not sure if it is used for mortgage or title insurance, but it could make sense to use it.

Insurance companies use proprietary “top secret” formulas for the scores, and there seems to be less information about the score and less direct ways to address it than there are for FICO scores. One major purpose of assessing people with the Insurance Score as part of the application process is to assess a premium relative to risk, and to prevent anti-selection, both of which insurance companies say are essential to their business models.

However, all the literature around suggests that insurance scores are computed mainly from your credit report (the same items that contribute to a FICO score), and from the loss history for the property. A company called ChoicePoint maintains a database called C.L.U.E. (like the board game - actually the acronym means "Comprehensive Loss Underwriting Exchange") (FAQ) that relates to the claims experience for properties. Other items could enter into the calculation, such as the claims experience in a general neighborhood, and the risk of flood, earthquake, wind, or wildfire in an area, relative to the coverages offered (flood usually has to be purchased separately). For auto insurance, your driving record (moving violations – not certain about photo enforced items) would become the most obvious item, as well as some profile items like age and gender and marital status (which may be becoming less important than they used to be; wouldn’t a 21 year old trained to drive a military vehicle or operate an jet be a better risk than the average 21 year old behind the wheel?)

To some extent the subject is disturbing because identity theft could compromise an insurance score, and it may be harder to resolve. Yet many property companies offer identity theft insurance endorsement, even to the point of coverage wrongful conviction for a crime committed by another.

All of this sounds related to still other services, like Tenant Checks, which screen perspective renters and look at items such as prior evictions.

Social activists are properly concerned about the potential for redlining certain neighborhoods. Many metropolitan areas experience unusually aggressive crimes in some neighborhoods, associated sometimes with illegal immigration, drug cartels and gangs – to the point that the problem is a genuine Homeland Security issue and should not be just the responsibility of local law enforcement and the insurance business.

The literature, however, does seem reassuring that insurance scores do not directly concern themselves with personal issues (sexual orientation, for example), or religious or political beliefs, or other social diversity factors.

The major starting point for this subject is the Insurance Scores website.

Look also at’s FAQ reference, and at Choice’s own reference (which offers a preview score for a small charge). These references indicate that one cannot easily get CLUE data on a property without legitimate purposes.

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