Insurance 101


Related Information

  • FB Advantage Discount


  • Insurance Scores and the FB Advantage Discount

    Farm Bureau Insurance of Michigan offers the FB Advantage Discount for Homeowners and Personal Automobile insurance policies for eligible individuals.

    Eligibility for the FB Advantage Discount is based upon an insurance score that is determined 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. We provide the FB Advantage 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.


    Is credit-based insurance scoring legal?

    The Fair Credit Reporting Act (FCRA) is a statute that allows use of an individual's credit history for specified 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. Michigan law also allows the use of credit information for insurance pricing.


    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.


    My credit score is different than what you have for my insurance score. Why is that?

    Credit scores predict how people will pay their bills; insurance scores predict the likelihood that claims will be submitted.

    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 for a discount who may never submit a claim. But, overall, people with lower insurance 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. However, 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.


    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. We are filed with the Department of Insurance and Financial Services (DIFS) to use insurance scores in this way.


    I don't understand why I get a different insurance score and discount on my Homeowners Policy than I do on my Personal Auto Policy?

    The scoring models from which the insurance score is derived are different for Homeowners versus Personal Auto. Since two different scoring models are used for the two different lines of business, the scores they produce can vary. Company loss experience for the particular line of business determines the level of discount that can be given for a particular score.


    I called LexisNexis, and they told me Farm Bureau determines eligibility for the FB Advantage Discount. Is that true?

    Yes, Farm Bureau decides which score ranges qualify for the FB Advantage Discount, based on our loss experience.

    Neither LexisNexis nor the credit reporting agency makes the decision regarding eligibility for the FB Advantage Discount and cannot answer questions about eligibility.


    So, who determines what discount I get?

    Farm Bureau decides who will receive a discount based on our loss experience.


    Who determines what score I get?

    The score is determined from an insurance scoring model. Many 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, gender, marital status, 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?

    Considerable investment went into the development of the mathematical algorithm that was used to develop the insurance score. The algorithm is proprietary and is not released to the general public. It has, however, been shared with the state insurance regulators.


    How can I improve my score?

    Farm Bureau Insurance recommends that you make sure your credit history is correct. Otherwise, in general, pay bills on time, maintain low balances on credit cards, and apply for and open new credit accounts only as needed, and get rid of credit cards you don't need.

    You can request a copy of your credit report from the appropriate agencies listed below:

    For Personal Auto new business and renewals effective prior to 7/1/19, as well as all Homeowners (including Renters and Unit-Owners), Mobile Homeowners, and Lake Estate® policies:
      Equifax can be contacted as follows:
      Toll free at: (877) 322-8228
      Online at: www.annualcreditreport.com

    For Personal Auto new business and renewals effective after 7/1/19:
      Experian can be contacted as follows:
      Toll free at: (877) 322-8228
      Online at: www.annualcreditreport.com

    Once any errors are corrected, we can check to see if you qualify for a better discount.

    Additional Information is available at www.consumerdisclosure.com.


    LexisNexis 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, LexisNexis 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 LexisNexis again and let them know that they did not send the credit report.


    There are no errors on my credit report. What can I do to improve my insurance score and get a better discount?

    Here are some basics 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 bankruptcies, collections, and derogatory public records
    • Multiple recent account openings
    • Numerous consumer-generated inquiries


    I have had a dramatic personal event that has impacted my credit. Is there anything I can do to improve my discount?

    Yes, if the credit information in your consumer report has been directly influenced by certain events, you may qualify for an exception to how we applied this information to your qualification for a discount. If you have experienced such an event and it has directly influenced your credit information, you can request an exception. We will require reasonable, independently verifiable documentation of the event and you must demonstrate that the event had a direct and meaningful impact on your credit information. Click here for more information.


    How can I obtain a free credit report?

    You can obtain a free copy of your credit report once every 12 months by contacting AnnualCreditReport.com by telephone at (877) 322-8228 or online at www.annualcreditreport.com and requesting the appropriate credit reporting agency.

    You have the right to dispute inaccurate or incomplete information in the credit report by contacting the appropriate credit reporting agency or LexisNexis. Your filed statement will then be included or summarized in any credit report containing the information in question.


    How do I contact LexisNexis?

    LexisNexis can be contacted by telephone, toll-free, at (888) 497-0011 or at (800) 456-6004, or by writing to: Customer Service, LexisNexis Risk Solutions, Inc., P.O. Box 105108, Atlanta, GA 30348-5108.

    Additional Information is available at www.consumerdisclosure.com.

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