Frequently Asked Questions
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 premium discount for insureds who have an insurance score that reflects this reduced claim potential.
Yes, insurance industry and independent studies have shown a significant statistical correlation between insurance scores and loss experience. Also, our own loss experience demonstrates a similar correlation.
The mathematical scoring program was developed by LexisNexis after a study of over a million credit and insurance claim records.
The Fair Credit Reporting Act (FCRA) is a Federal law 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.
Leading auto insurance companies and many that write homeowners insurance in Michigan use insurance scores.
There may be no intuitive link between how an individual handles his/her credit and whether they will submit 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 or will not be insured.
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.
Credit scores predict how people will pay their bills; insurance scores predict the likelihood 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.
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 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. 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. We have other discounts that recognize insureds that have not had claims.
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 Office of Financial and Insurance Regulation to use insurance scores in this way. We offer other discount programs to recognize insureds that have not submitted any claims.
The scoring models from which the insurance score is derived are different for Homeowners versus Family Auto. One scoring model is used to determine the potential for Homeowners claims and another, different model, was designed to specifically predict the likelihood that auto claims would be submitted. Because 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.
Yes, Farm Bureau decides which range of scores qualifies for the FB Advantage Discount, based on our loss experience.
Neither LexisNexis nor Equifax makes the decision regarding eligibility for the FB Advantage Discount and cannot answer questions about eligibility. We determine eligibility for the discount.
We decide who will receive a discount based on our loss experience for the different ranges of scores (or tiers).
The score is determined from a LexisNexis 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, net worth, gender, marital status, race, religion, age, etc. are not factors in the development of the insurance score.
LexisNexis has a considerable investment in the development of the mathematical algorithm used to develop the insurance score. The algorithm is proprietary to LexisNexis and is not released to their customers (including Farm Bureau Insurance) or the general public. It has, however, been shared with state insurance regulators.
We recommend that you make sure your credit history is correct. Otherwise, in general, LexisNexis says pay bills on time, maintain low balances on credit cards, apply for and open new credit accounts only as needed, and get rid of credit cards you don’t need.
LexisNexis can help you obtain a copy of your credit report. You can review it for errors. 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.
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.
Here are some basics from LexisNexis regarding scores:
• Pay bills on time
• Maintain low balances on credit cards
• Apply for and open new credit only as needed
• A high degree of utilization of credit
• Multiple recent account openings
• Numerous consumer generated inquiries
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 direct and meaningful impact on your credit information. Click here for more information.
You can obtain a free copy of your credit report once every 12 months by contacting the credit agency, Equifax. You have the right to dispute inaccurate or incomplete information in the credit report by contacting Equifax or LexisNexis. Your filed statement will then be included or summarized in any credit report containing the information in question.
LexisNexis can be contacted as follows:
Toll free at: 888-497-0011 or 800- 456-6004
Online at: www.consumerdisclosure.com
By mail at: LexisNexis Risk Solutions, Inc.
PO Box 105108
Atlanta GA 30348-5108
Equifax can be contacted as follows:
Toll free at: 877-322-8228
Online at: www.annualcreditreport.com