That’s the question I hear weekly and struggle with because I often can’t explain why Tom in TX pays Four Grand while Jerry in TX pays Ten Grand.
Agents and Direct all have the same quoting platform and simply key in the Classification as Expediter rucking for Hire with Unlimited Radius as required by most companies. Based on similar location, driver age, violation history and experience credits, why DOES Tom get a break on rates while Jerry does not?
Everyone has heard the pat answer, “Insurance underwriters use many factors to determine risk acceptability and the premium charged. A collection of data about you is used to determine your insurance score. Basic parameters include requirements per your state, you operations, radius, experience, MVR, and loss history.”
But assuming all of the above is similar, why does “the system” give Tom more credits to reduce his premium than Jerry? And why does Jerry continue to receive poor rate offers through competitive insurance companies?
In the early 1990’s credit based insurance scores were introduced as a predictor of how likely a consumer is to have an insurance loss. It started with 5 basic areas consisting of payment history, outstanding debt, credit history length, pursuit of new credit and credit mix. I’m told current data continues to support the premise with the concept expanded to other aspects of credit, but that information and algorithm is proprietary to all insurance companies.
Inside tip from my personal observations, someone can have a good credit score but a bad insurance credit score because of high credit card balances where someone is paying the minimum about due each month. (Please don’t shoot the messenger; I would want to know…)
Bottom line, insurance credit scoring is not going away. 92% of insurers now use these scores as part of their determination of credits and premium. Agents and Direct Underwriters do not see your score, just your premium.
What’s your real life solution should you continue to run into this challenge? Work with a Motor Carrier who has an in-house insurance program that uses the company’s entire driver risk pool. Then work on putting your credit house in order as best you can…everyone can have a bump in the road.
Insurance related inquiries are NOT counted against your credit score, so run another quote on yourself at any time to see if your score has improved. Then take advantage of the savings and personal service with your own policy in the future.