Why Auto Insurance Companies Use Credit to Rate

There has been an ongoing debate on whether a person’s credit score is a good indicator of the risk associated with insuring them. Many feel the use a motorist’s financial history is not a fair practice and has nothing to do with the consumer’s ability to drive and his or her likelihood of filing a claim. But if a person disagrees with an auto insurance company’s decision to use this information to help determine rates, he or she should be aware that there is evidence to support the correlation between a person’s credit and the chance of them claiming a loss.

Consumers should understand that carriers are in the business to turn a profit, and in order to do so companies must assess risk and protect against losses. While not many consumers are sympathetic towards insurers, they must realize that the less claims that carriers pay out, the cheaper the rates that can be offered. Companies that suffer significant losses often have to increase premiums to offset the payouts given to claimants. That is why if a consumer obtains and compares car insurance quotes online or by any other means, it is highly likely that there will be a substantial difference in premiums between insurers.

Get the Most Affordable Car Insurance Regardless of Credit

Although many do not agree with the use of finances to rate drivers, maybe unless they have great credit, insurers put a lot of time and effort into conducting studies to predict risks. Studies have shown that not only do motorists with poor credit scores be more likely to file claims but that the severity of accidents and payments for losses are higher. But just like all auto insurance policies, where one person is receiving a discount, another is being surcharged. And while those with good credit histories may pay lower rates, others may have to make up the difference.

Fortunately, there is a way to get the most affordable premiums available regardless of how credit based insurance scores may affect drivers. Whether a person has a sports car, bad driving record or poor credit, the most effective way to ensure that the best deal is found it to shop around. There are many companies out there and each have different experiences with policyholders. Although there may be a company charging a higher rate for coverage, which could be because previous insureds with bad credit filed claims, another carrier may have had a better experience with similar individuals and can offer cheaper rates. The best way to find out is to get as many quotes as possible.

Source: http://www.onlineautoinsurance.com/

 

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