Most Auto Insurers Use Credit History Information To Set Rates But Only One Helps You Understand How And Why

Another industry first for Progressive: Auto insurer introduces two new services that help Kansans better understand insurance credit scores.

KANSAS CITY, Kan. – June 2, 2003 � Ask most insurance companies how they use information about a person�s credit history, and see what kind of response you get. Ask Progressive, and you�ll receive a wealth of information.

In Kansas, the use of credit information has been a hotly debated topic in the legislature and among consumers. Understanding that people are concerned about the issue and have many questions, The Progressive group of insurance companies (sixth largest auto insurer group in Kansas; third largest in U.S.) wants to be open about how it uses credit and why.

That�s why Kansans who obtain a quote from Progressive can request an easy-to-read report that explains exactly what elements of their credit history are reviewed and a toll-free number that they can call to inquire about exceptions based on extraordinary life events that may have negatively affected their personal credit history.

The services are only available from Progressive and are provided free by a specially trained �Credit Information Team,� created specifically to consult with consumers who have questions or concerns about how Progressive uses credit information to price policies more accurately.

Progressive wants Kansans to understand that it uses credit (in addition to other factors such as age, gender, and vehicle make and model) for several main reasons.

  • Credit history is highly predictive of future losses.
  • Independent research conducted by the University of Texas and the Virginia Department of Insurance shows there is a correlation between a person�s credit history and the likelihood of them becoming involved in an accident. Likewise, in reviewing more than 600,000 of its customers� claims, Progressive found that people with below average credit history are twice as likely to have a future accident.
  • Using credit information allows Progressive to offer more competitive rates to more consumers.

Progressive also wants people to know that�

  • Credit is not the most important piece of information Progressive reviews. Driver age, vehicle year, make and model and number of driver violations each weigh more heavily in developing Progressive�s rates than does information about a person�s credit history.
  • Progressive never uses credit history information to refuse to insure a driver or cancel a policy.
  • Progressive respects people�s privacy and never shares information obtained in a credit report with third parties for marketing purposes.

When developing an auto insurance rate, companies generally take into consideration a variety of information, including past claims other customers like you have had, industry claims information, and information about you and your vehicle. They do this because they have found certain information to be helpful in predicting whether you�ll have a future accident or claim. One of the pieces of information they have found to be predictive of future accidents or claims is a consumer�s credit history, so most insurers are using this information to help develop more accurate rates.

According to a 2001 study by Conning and Co., a nationally respected provider of research publications on the insurance industry, more than 90 percent of insurance companies look at credit to determine rates, making it that much more important for consumers to understand the reasons for its use.

�As an industry we haven�t done a good job of helping people understand credit and its role in determining auto insurance rates,� said Evan McKee, Progressive�s Kansas product manager. �Introducing these two new services is a first step in helping to change that.�

McKee said: �We study the accident experience of people who have been insured with us and we analyze it to determine what pieces of information can help us to understand the likelihood that someone will have a future claim or accident. For example, we reviewed information for more than a half million drivers and found that those who had a speeding ticket in the past three years are generally twice as likely to have an at-fault accident, so this is obviously valuable information to use when determining auto insurance rates. Likewise, we have data that support that there is a correlation between credit and likelihood of future accidents.�

When people get an auto insurance quote from a Progressive insurance company through an independent agent, online or by phone, they can request that Progressive�s Credit Information Team provide them with an easy-to-read report detailing their insurance credit score. The �Personal Insurance Credit Inquiry� report will show how the company calculated that person�s insurance credit score and compares it to the score of the average person receiving a quote from Progressive. The Credit Information Team can also handle requests for exceptions to the score and help consumers understand the steps they should take and who to contact if they have questions about information on their credit report.

McKee said, �Consumers should know that the credit rating information Progressive uses focuses mainly on a person�s bill-paying behavior and how they use available credit. Both factors are within the consumer�s control. �

To help consumers better manage their credit, Progressive offers the following tips:

  • Pay your bills on time.
  • Don�t use all credit available to you.
  • Don�t automatically close old, unused lines of credit (a person�s credit score may be based in part on information about how long they�ve used credit responsibly � the longer the better).
  • Retrieve a copy of your credit report from time to time to review for accuracy. The three main credit reporting agencies are Equifax (1-800-685-1111 or equifax.com), Experian (1-888-397-3742 or experian.com) and TransUnion (1-800-645-1938 or transunion.com).
  • The Progressive group of insurance companies (NYSE:PGR), in business since 1937, comprises the nation’s third largest auto insurance group and provides drivers with competitive rates and 24/7, in-person service. The companies offer insurance by phone at 1-800-PROGRESSIVE, online at progressive.com and through nearly 500 independent insurance agencies in Kansas and more than 30,000 independent agencies in the U.S. Providing stakeholders the information they need to make more informed decisions is a key company strategy. In 1994, Progressive became the first auto insurance company to provide its rates alongside the rates of other companies so consumers could easily compare and decide and in 2001, it became the first Fortune 500 company to report operating results monthly. The Progressive Corporation, the holding company, has headquarters in Mayfield Village, Ohio. More information can be found at www.progressive.com.