Thursday, January 19, 2017

Your Record Drives Underwriting

It makes sense that your driving record would impact your auto insurance. If you've got a spotless record, you're going to pay less than your twin with the multiple DUI's (assuming similar vehicles, of course). But did you know that it also affects how much you'll pay for life and homeowner's insurance, as well?

I did know that it plays a role in life insurance underwriting: after all, applications ask for your driver's license number, and I've seen cases where really bad records result in less favorable underwriting results (which means higher premiums).

But I didn't know that it also comes into play when underwriting homeowner's (and, one presumes, tenant's) insurance, too:

"Allstate, meanwhile, is using driving records to help price home insurance. The company began doing so in 2011 in Oklahoma ... Home insurance prices are based mostly on a home’s reconstruction cost and location. Allstate started looking at driving records to learn about homeowners’ behavior."

To be sure, this makes sense: if you're prone to risky driving behavior, you're probably not going to be the most careful homeowner:

"Poor home maintenance or careless security can lead to damage and home insurance claims."

Which also makes sense.

But as it turns out, that doesn't really matter:

"Insurers don’t have to explain why certain behavior leads to claims. They only have to show a correlation between the variables and claims." [ed: emphasis in original]


Now, this practice isn't widespread - yet - but don't be surprised if your homeowner's insurer runs a motor vehicle report at renewal time.

And drive safely.

[Hat Tip: ‏@LexisInsurance]
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