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Insurance Shopping Tips

What Auto Insurers Know About You

Auto Insurance companies probably know more about you than you'd think. It's not necessarily a bad thing. Auto insurers use your driving record, credit history, and other info in making decisions such as whether to cover your vehicles and how much to charge you for coverage.

Most insurers use credit information to determine your insurance risk score. If you have a good credit score, a history of paying bills on time and no bad debt, chances are you'll pay less for your auto insurance. Insurers see a direct relationship between your insurance risk score and the chances of you filing a claim. An insurance applicant who has a history of being late on bill payments and who often opens and closes savings or credit accounts could pose an unacceptable risk for an insurance company.

Insurance industry experts Carolyn Gorman, Dick Luedke, Nichole Mahrt and Dave Snyder provide some clarification. Your credit rating may affect what you pay for auto insurance, so keep tabs on it, recommends Gorman, vice president of the New York-based Insurance Information Institute. Gorman believes that credit makes auto insurance rates more accurate, fair and objective. The use of insurance scoring varies from state to state and company to company, says Gorman, but the insurance industry believes that drivers with long, stable credit records have fewer accidents than drivers who don't.

Gorman says that there are various Internet services that permit consumers to check their credit rating and offer suggestions on how to improve their scores.

"Motor vehicle records are invaluable to a company in the assessment of auto insurance risk, and to the extent they are not accurate, we are unable to assess that risk as well as we might otherwise be able to," says State Farm spokesperson Dick Luedke.

Credit scoring is another tool that enables insurers to estimate risk, according to Nicole Mahrt, western regional public affairs director for the American Insurance Association. "It helps them accurately price the product for you so that you pay a premium that reflects your individual risk characteristics."

Mahrt's AIA colleague, Dave Snyder explains that "because driving experience is so important as a predictor of insurance risk, insurers try to gather as much pertinent information as they can about the drivers, and that would include state motor vehicle records and related data from other sources."

Daniel Kummer, director of auto insurance for the Property Casualty Insurers Association of American warns that "you could end up with legal difficulties or get in trouble with your auto insurer by leaving citations or convictions off an insurance application." Kummer goes on to explain why. "Doing that could make you vulnerable to fraud charges. And misrepresenting your driving record on your insurance application by leaving out reference to citations for DUI or other moving violations could give the insurance company grounds to cancel your policy. And if you make such an omission in your application, you might get caught by the insurer, and it's likely your rates will go up as a result."

Original article can be found at Insurance.com: Car Insurance Companies Know Plenty about You