Insurance Handbook - Alaska Department of Community and ...

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Updates at www.iii.org/issues_updates Insurance Topics Auto Credit Insurance Scoring a bad score is below 600. People with low insurance scores tend to file more claims. But there are exceptions. Within that group, there may be individuals who have stellar driving records and have never filed a claim just as there are teenager drivers who have never had a crash although teenagers as a group have more accidents than people in other age groups. Credit Report Information—Who Wants It? It is becoming increasingly important to have an acceptable credit record. Whether we like it or not, society equates the ability to manage credit responsibly with responsible behavior, even if individuals have a bad credit record through no fault of their own. Landlords often look at applicants’ credit records before renting apartments to see whether they manage their finances responsibly and are therefore likely to pay their rent on time. Banks and other lenders look at the credit records of loan applicants to find out whether they are likely to have loans repaid. Some employers also look at credit records, especially where employees handle money, and view a good credit record as a measure of maturity and stability. In some insurance companies, underwriters have long used credit records in cases where additional information was needed. Before the development of automated scoring systems, underwriters would look at the data and make decisions, often erring on the overly cautious side that disadvantaged many more people. Automated insurance scoring and underwriting systems eliminate the weaknesses inherent in someone’s personal judgment and have allowed more drivers to be placed in preferred and standard rating classifications, saving them money. With the development of these scoring models, the use of credit-related information in underwriting and rating for many insurers has become routine. Insurers use insurance scores to different extents and in different ways. Most use them to screen new applicants for insurance and price new business. Why Insurers Need It: Insurers need to be able to assess the risk of loss—the possibility that a driver or a homeowner will have an accident and file a claim— in order to decide whether to insure that individual and what rate to set for the coverage provided. The more accurate the information, the closer the insurance company can come to making appropriate decisions. Where information is insufficient, applicants for insurance may be placed in the wrong risk classification. That means that some good drivers will pay more than they should for coverage and some bad drivers will pay less than they should. The insurance company will probably collect enough premiums between the two groups to pay claims and expenses, but the good drivers will be subsidizing the bad. By law in every state, insurers are prohibited from setting rates that unfairly I.I.I. Insurance Handbook www.iii.org/insurancehandbook 41
Insurance Topics Updates at www.iii.org/issues_updates Credit Auto Insurance Scoring discriminate against any individual. But the underwriting and rating processes are geared specifically to differentiate good risks from bad risks. Since insurance is a business, insurers favor those applicants that are least likely to suffer a loss. One of the key competitive aspects of the personal lines insurance business is the ability to segment risks and price policies accurately according to the likely cost of claims generated by those policies. Insurance scores help insurers accomplish these objectives. 42 I.I.I. Insurance Handbook www.iii.org/insurancehandbook
Page 1 and 2: Insurance Handbook A guide to insur
Page 3 and 4: Insurance Information Institute 110
Page 5 and 6: To The Reader For over 50 years, th
Page 7 and 8: Regulatory/Legislative Organization
Page 9 and 10: Insurance Basics Overview Accountin
Page 11 and 12: Insurance Basics Auto Insurance 4.
Page 13 and 14: Insurance Basics Homeowners Insuran
Page 15 and 16: Insurance Basics Homeowners Insuran
Page 17 and 18: Insurance Basics Business Insurance
Page 23 and 24: Insurance Basics Life Insurance Lif
Page 25 and 26: Insurance Basics Life Insurance •
Page 27 and 28: Insurance Basics Annuities 4. Taxfr
Page 29 and 30: Insurance Basics Long-Term Care Ins
Page 31 and 32: Insurance Basics Disability Insuran
Page 33 and 34: Insurance Basics Disablity Insuranc
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Page 37 and 38: Insurance Topics Updates at www.iii
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Page 85 and 86: Glossary 401(K) PLAN An employer-sp
Page 87 and 88: Glossary ADJUSTER An individual emp
Page 89 and 90: Glossary ANNUITY DEATH BENEFITS The
Page 91 and 92: Glossary BALANCE SHEET Provides a s
Page 93 and 94: Glossary larger cushion of capital
Page 95 and 96: Glossary receive full payment on a
Page 97 and 98: Glossary *CONVERTIBLE TERM INSURANC
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Glossary savings and loan associati
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Glossary EMPLOYMENT PRACTICES LIABI
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Glossary insured’s spouse and chi
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Glossary contract with no penalty.
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Glossary GUARANTY FUND The mechanis
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Glossary premium life insurance pol
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Glossary INTERNET INSURER An insure
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Glossary LIMITS Maximum amount of i
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Glossary the states for people whos
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N Glossary NAMED PERIL Peril specif
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Glossary ORIGINAL EQUIPMENT MANUFAC
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Glossary and beyond reserves, prote
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Glossary be monthly, quarterly, sem
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Glossary price. Repurchase agreemen
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Glossary part of the responsibility
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Glossary cover the amount of the lo
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Glossary a preexisting condition. (
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Glossary VANDALISM The malicious an
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Glossary Property/Casualty Insuranc
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Directories ISO 545 Washington Blvd
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Directories PCI - WASHINGTON, DC 44
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Directories Financial Services Indu
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Directories COMMODITY FUTURES TRADI
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Directories GLOBAL ASSOCIATION OF R
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Directories NATIONAL ASSOCIATION OF
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Directories THE COUNCIL OF INSURANC
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Directories GRIFFITH INSURANCE EDUC
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Directories Adjusters NATIONAL ASSO
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Directories INSURANCE COMMITTEE FOR
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Directories INSURANCE SERVICES NETW
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Directories Legal Issues and Servic
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Directories INSURANCE REGULATORY EX
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Directories INSURANCE INSTITUTE FOR
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Directories Title Insurance AMERICA
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Directories INSURANCE ADVISORY BOAR
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Alphabetical Index State specific a
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Alphabetical Index Intermediaries a
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State Organizations State Organizat
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State Organizations Pacific Associa
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State Organizations Florida State A
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State Organizations Illinois State
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State Organizations Kentucky Insura
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State Organizations Association Hea
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State Organizations Montana State A
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State Organizations Monmouth Juncti
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State Organizations Agent Associati
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State Organizations Other Organizat
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State Organizations Texas Coalition
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State Organizations Agent Associati
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Alphabetical Index YEAR EVENT 1601
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Brief Alphabetical History Index YE
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I.I.l. Resources COMMERCIAL INSURAN
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I.I.I. Member Companies Lockton Com
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The I.I.I. Insurance Handbook • C
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