Tools and Education


Using Credit

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State Auto is a company that believes responsible behavior should be rewarded. We put action to these words by developing rates using a variety of criteria.

Simply put, insurance companies are in the business of assuming risk. We assume the risk, or chance that customers will suffer a loss, in return for an insurance premium. While we hope you never suffer personal loss, we do realize that some of our customers will. The reality is that the insurance premiums collected from many people are designed to pay for the claims of a relatively few. Instead of charging everyone the same premium, we feel the responsible thing to do is to match the premium with the risk. In other words, we charge a lower price for those who we anticipate will have fewer claims, and a higher price for those who we anticipate will have more claims.

We feel that fairness dictates we, to the extent possible, develop individualized insurance premiums that reflect the likelihood of future claims. The challenge is to try to predict, in advance, those who are more prone to loss. Numerous tools are used to predict claims activity. One of the most accurate is the insurance bureau score, developed using information from an individual’s credit bureau report. Unlike a credit score, which banks and other lending institutions have used for years to predict the likelihood that their clients will pay their bills, insurance bureau scores were developed solely to predict insurance claims activity. The better a person’s score, the less likely he or she is to submit a claim, which therefore should translate to a lower premium.

The good news is that, for most people, insurance bureau scoring results in a lower premium. The bad news is that not everyone sees the value in rewarding the majority, while at the same time asking those who are statistically more likely to submit claims to pay their fair share. State legislators and other government officials in several states have restricted the use of insurance bureau scores through the passage, and implementation of various laws and insurance regulations.

We see the value in using the scores – and hope you do too. Insurance bureau scores facilitate fairness – and enable us to reward people with a history of financial responsibility.

If you are concerned about this issue, please contact your state legislators.

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