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Michigan's Insurance Company
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Insurance Scores and the FB Advantage Premium Discount The Farm Bureau Insurance Companies offer the FB Advantage Discount for homeowner and family automobile insurance premium discounts for eligible individuals. Eligibility for the FB Advantage Discount is based upon an insurance score that a consumer reporting agency, ChoicePoint, determines from certain financial characteristics found in an individual's credit report. Following are some frequently asked questions regarding insurance scores. Why do insurance companies use insurance scores? Insurance companies decide what rate to charge based upon the potential for loss. Insurance companies consult a number of sources for underwriting information to help them make better, more informed decisions about the potential for loss. Research shows that individuals with certain financial characteristics on their credit report are less likely to submit claims. The Farm Bureau Insurance companies provide the FB Advantage Premium Discount for insureds who have an insurance score that reflects this reduced claim potential. Are you sure this works? Yes, insurance industry and independent studies have proven a statistical correlation between insurance scores and loss experience. Also, Farm Bureau Insurance loss experience demonstrates a similar correlation. Why do you believe credit-based insurance scoring is legal? The Fair Credit Reporting Act (FCRA) is a statute that allows use of an individual's credit history for certain allowable reasons. Those reasons include the underwriting of insurance involving a consumer as well as account reviews to determine whether a consumer continues to meet the terms of the account. Do all insurance companies use Insurance Scoring? Leading auto insurance companies and many that write homeowners insurance in Michigan use insurance scores. How does the way I handle my credit indicate whether I will turn in claims? There may be no intuitive link between factors on the credit report and submitting claims, but there is a definite statistical correlation. If a person does not qualify for the FB Advantage discount, it does not mean the individual has bad credit. A similar situation occurs with multi-policy credits. There is not an intuitive link as to why persons with multiple policies with one company have fewer losses. But, it has been shown statistically to be true, and that is why many companies offer multi-policy credits. I recently applied for a loan. My credit score is much higher than what you have for my insurance score. Why is that? Credit scores predict how people will pay their bills; insurance scores predict loss experience. A credit score and an insurance score are two different things, although the base of information is taken from the credit report. An insurance score is an indicator of the likelihood the individual will submit claims and was developed after an extensive analysis of persons who submit claims and the factors on their credit reports. I've never had a claim, why don't I get the highest discount? As with any group, there will be exceptions. There will be persons in the group who receive a discount who submit claims, and there will be persons who do not qualify who never submit a claim. But, overall, people with lower scores are more likely to submit claims. The same is true for driving records. There are people who have tickets who will never submit a claim. But for the group of people, who have tickets, we can predict that they are more likely to submit claims. The same is true for insurance scores. The Company offers other discount programs to recognize insureds that have not submitted any claims. You have known me for years. I haven't submitted any claims. Does this seem fair? Yes, it is fair. The scores obtained are applied uniformly to everyone. The score either qualifies you for a discount or it does not. Farm Bureau Insurance is filed with the Office of Financial and Insurance Services to use insurance scores in this way. Farm Bureau Insurance has other discounts that recognize insureds that have not had claims. I don't understand. Why do I get a different discount on my homeowners than I do on my family auto policy? These are the reasons: 1. The products use different scoring models. 2. The products have different scoring tiers. I called ChoicePoint, and they told me Farm Bureau determines eligibility for the FB Advantage Discount. Is that true? Yes, Farm Bureau decides which scoring tiers qualify for the FB Advantage Discount, based on our loss experience. So, who determines what discount I get? Farm Bureau decides to whom we can give a discount based on our loss experience for the different score ranges (tiers). Who determines what score I get? The score is determined from a ChoicePoint scoring model. Fifty-four elements from the credit report are analyzed in the scoring model, such as: - How long accounts are established; - Public records, such as collections and delinquencies; and - Recent account openings It is important to note that items such as income, race, religion, age, etc. are not factors in the development of the insurance score. Why isn't more definitive information available about the factors that make up an insurance score? ChoicePoint has a considerable investment in the development of the mathematical algorithm used to develop the insurance score. The algorithm is proprietary to ChoicePoint and is not released to the general public. It has, however, been shared with the insurance regulators. How can I improve my score? Farm Bureau Insurance recommends that you make sure your credit history is correct. Otherwise, in general, ChoicePoint says pay bills on time, maintain low balances on credit cards, and apply for and open new credit accounts only as needed (get rid of credit cards you don't need). ChoicePoint can provide you with a copy of your credit report. Once any errors are corrected, we can check and see if you qualify for a better discount. Additional Information is available at www.consumerdisclosure.com. ChoicePoint didn't send me a credit report. They sent me something else. I don't even know what this is, do you? When contacted for a report, ChoicePoint sends copies of every consumer report ordered for an individual in the recent past. Insurance companies other than Farm Bureau may have ordered these reports. You will need to contact ChoicePoint again and let them know that they did not send the credit report. There are no errors on my credit report. What should I do now? Here are some basics from ChoicePoint regarding scores: Score Positives - Pay bills on time -Maintain low balances on credit cards - Apply for and open new credit only as needed Score Negatives - A high degree of utilization of credit - Multiple recent account openings - Numerous consumer generated inquiries How do I contact ChoicePoint? ChoicePoint can be contacted by telephone, toll-free, at (888) 497-0011 or at (800) 456-6004, or by writing to: Customer Service, ChoicePoint Services Inc., PO Box 105108, Atlanta, GA 30348-5108. Additional Information is available at www.consumerdisclosure.com. How can I obtain a free credit report? The recently enacted Fact Act requires that credit agencies provide consumers with a free copy of their credit report every 12 months if requested. You can obtain a free copy of your credit report once every 12 months by contacting Equifax by telephone at (877) 322-8228 or online at www.annualcreditreport.com. |
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