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How does West Bend use consumer credit to rate and underwrite insurance?
Independent studies have proven a strong connection between an individual's credit history and the likelihood of that person filing an insurance claim. In fact, as early as 1970, the U.S. Congress passed the Fair Credit Reporting Act (FCRA) which permits insurance companies to use credit information in making underwriting and rating decisions. Consequently, the insurance industry uses this information as a factor when rating and underwriting insurance. This factor is called an insurance score and it measures the applicant's likelihood of future losses, based on credit history.
West Bend uses the insurance score, along with other risk factors, to determine eligibility for our insurance programs. We do not use credit information alone as a reason to refuse coverage for any applicant. Insurance scores are also used in our rating process. Consumers with better scores receive more competitive rates for insurance coverage. West Bend currently provides discounted insurance rates to two thirds of our customers based on their good insurance scores. We obtain insurance scores from Choice Point, one of the nation's leading providers of information products to the financial services industry.
Is there a correlation between credit and loss history?
The following chart shows the relationship between the credit-based insurance scores and insurance losses. It's clear that as insurance scores improve, filed losses decrease. West Bend has also demonstrated the validity of this tool with our own book of business. More...
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