Auto Insurance And Public Records: What's The Connection?

Auto insurance companies use a variety of reports to determine whether to insure an individual and at what price. One such report is the C.L.U.E. report, which contains up to seven years of personal auto claims, including policy information, vehicle information, claim information, loss information, and amounts paid. This report is accessible by individuals once a year for free and can be obtained by contacting LexisNexis Risk Solutions.

Auto insurance companies use CLUE reports to assess risk

Auto insurance companies use CLUE (Comprehensive Loss Underwriting Exchange) reports to assess risk when taking on new customers. The reports are generated by LexisNexis and contain up to seven years of personal automobile claims history. Over 99% of auto insurance companies contribute claims data to the CLUE database, and in turn, only these contributing companies can withdraw information from the database.

CLUE reports include policy information such as the name, date of birth, and policy number of the policyholder, as well as claim information such as the date of loss, type of loss, and amounts paid. They also indicate if a claim was denied. This information helps insurers decide whether to approve or deny coverage, how much coverage to provide, and what premiums to charge.

Insurers use CLUE reports to determine how likely it is that a claim will be filed in the future. For example, a claim relating to theft could indicate a car may be stolen again, while claims for fire damage might mean a home is in a wildfire zone. More claims typically lead to higher premiums, as they suggest a higher risk for the insurer. However, some claims, like one to cover a new roof or replacement tires, can indicate future repairs are less likely and lead to lower rates.

Individuals can request a free copy of their CLUE report once a year to review its accuracy and dispute any errors.

Driving records impact insurance premiums

Driving records have a direct impact on insurance premiums. Insurance companies rely on historical data to assess the risk associated with insuring a driver. A clean driving record with no accidents or violations generally results in lower insurance premiums. Conversely, a record with accidents, traffic tickets, or other infractions can lead to increased rates.

Accidents, particularly those where the driver is at fault, signal a higher risk to insurance providers. Drivers with a history of accidents are more likely to file insurance claims, resulting in increased costs for the insurer. Multiple accidents may lead to a higher premium as insurance companies may perceive the driver as a higher liability.

Traffic violations, such as speeding, reckless driving, or running red lights, are red flags for insurers. These violations indicate a disregard for traffic laws and responsible driving behaviour, leading to an increased risk assessment and potentially higher premiums. The cumulative effect of multiple violations can further amplify this impact.

Driving under the influence (DUI) or driving while intoxicated (DWI) significantly affects insurance premiums. Such convictions signal a high level of risk and demonstrate irresponsible behaviour. Insurance companies may respond by substantially increasing premiums or even refusing coverage due to the elevated risk associated with these offences.

In some jurisdictions, insurance companies employ a point-based system to assess a driver's risk. Points are assigned for accidents, violations, and other driving-related offences. Accumulating points can lead to premium surcharges, resulting in higher insurance rates based on the number of points. The severity and frequency of offences determine the number of points assigned.

While past driving infractions can impact insurance premiums for a considerable time, there are ways to mitigate their effect:

• Completing a defensive driving course can demonstrate a commitment to safe driving and may even lead to insurance discounts.
• Maintaining a clean driving record for an extended period can gradually improve insurance rates, as insurers view recent driving history positively.
• Shopping around for quotes from multiple insurance providers can be beneficial, as different companies may have varying policies and rates for drivers with infractions.
• Improving one's credit score can indirectly help lower insurance costs, as some states consider credit scores when determining premiums.

Credit history is important to auto insurance companies

Auto insurance companies care about your credit history because it helps them determine your insurance score, which is an important factor in calculating insurance premiums. This score is different from a regular credit score and is used to predict the likelihood of you filing insurance claims that cost the company more than it collects in premiums.

In the US, all major car insurance companies, including GEICO, Progressive, and State Farm, do a credit check during the quoting process. Historical data from the Federal Trade Commission shows that drivers with poor credit file more claims than those with excellent credit, and these claims are more expensive for the insurer. Ultimately, the goal of underwriters is to minimize the risk to the insurer, so those deemed "high-risk" are often subject to higher premiums or even denied coverage.

Your credit score can influence your insurance rate in two ways. Firstly, a higher credit score is often associated with lower car insurance rates, with the difference in average auto insurance rates between the lowest and highest levels of credit being upwards of $1,500 per year. Secondly, a poor credit score can lead to higher insurance premiums. Drivers with poor credit pay, on average, $144 more per month for full coverage than those with good credit.

It's worth noting that not all states allow insurance companies to use credit scores in their decision-making process. California, Hawaii, and Massachusetts ban companies from using credit reports to determine insurance rates, believing that this may disadvantage low-income drivers. Instead, companies in these states base rates on factors such as driving records and location.

Undisclosed drivers can be found through public records

There are two types of Driver Discovery products: Additional Driver Discovery (A.D.D.) and Youthful Driver Discovery (Y.D.D.). A.D.D. identifies potential additional drivers in a household, regardless of age. Y.D.D., on the other hand, alerts carriers to the presence of a newly licensed youth between the ages of 15 and 25 at a particular address. This product is only available in a select group of states.

Driver Discovery is not considered a "consumer report" under the federal Fair Credit Reporting Act, so it cannot be used to determine eligibility for credit, insurance, or employment. However, it can be a valuable tool for insurance companies and other businesses to identify undisclosed drivers and manage their risk.

Public records related to driver and vehicle information are generally restricted to protect privacy. For example, in Nevada, a third party cannot access information about a specific driver's license or registration without a notarized release from the individual. However, there are exceptions for certain authorized entities, such as insurance companies, tow yards, and attorneys, who may receive records related to abandoned or crashed vehicles.

To access driver records, individuals or authorized third parties may need to complete and mail specific applications and pay the required fees. This process varies by state and the specific information being requested.

Vehicle registration reports provide insight into lapses in registration

Vehicle registration reports are an important tool for insurers to assess risk and set accurate premiums. These reports can provide a detailed overview of a vehicle's history, including lapses in registration, shared ownership, and branded title information.

A vehicle registration report typically includes information such as the vehicle's make, model, year, body style, and Vehicle Identification Number (VIN). It also includes the name and address of the vehicle registrant, as well as any co-signers or second owners. The report will show the registration expiration date and plate type, and if the vehicle has a branded title, such as salvaged, rebuilt, junked, or flooded.

Lapses in vehicle registration can occur due to various reasons, but the two most common reasons are driving without car insurance and driving without a valid driver's license. If a vehicle owner fails to keep up with their car insurance premiums, their insurance provider is obligated to notify the DMV of the coverage gap. This results in a lapse in registration and, consequently, a suspension of the vehicle's registration.

Vehicle registration reports can help insurers identify these lapses in coverage and assess the risk associated with insuring a particular vehicle. By obtaining this report, insurers can make informed decisions about whether to provide coverage and at what price. This helps ensure that premiums are set accurately, reflecting the potential risks associated with the vehicle.

In addition to lapses in registration, vehicle registration reports can also uncover shared vehicle ownership. This information is crucial for insurers as it helps identify all individuals with an interest in the vehicle. By understanding the ownership structure, insurers can properly assess the risk and set appropriate coverage limits and premiums.

Frequently asked questions