NEW YORK (MainStreet) Drivers with poor insurance scores pay 91% more for car insurance than those with outstanding credit-based insurance scores, according to a new study.
"Considering all of the factors that go into car insurance rates, credit is actually one of the easiest to control," said Laura Adams, senior insurance analyst with InsuranceQuotes.com.
An InsuranceQuotes.com report discovered that drivers with median credit pay 24% more.
Information in credit reports, like late payments, credit card balances and credit inquiries, are used by insurers to predict the likelihood of a future insurance loss.
"Responsible habits, such as paying your bills on time and minimizing debt, pay off in many ways, including lower premiums for car insurance," said Adams.
Rather than FICO credit scores, insurers generally use a proprietary scoring model, which includes factors such as driving record, age, gender, credit and past claims, to evaluate risk and determine premiums.
"Consumers should monitor their credit report at least once per year, get errors corrected and notify property insurers about positive changes. This could lead to hundreds of dollars in annual savings," Adams said.
At least seven of the top ten auto insurers in the U.S. have implemented usage-based or pay as you go programs in at least one state, according to a Towers Watson survey.
"The idea behind usage-based programs is to give drivers a financial incentive to drive less and depending on the information that is monitored to drive more carefully," said Michael Barry, vice president with the Insurance Information Institute. "The more positively they react to the incentive, the less a driver pays for their auto insurance."
About two-thirds of drivers who sign up for pay-as-you-drive car insurance are saving money but 58% of Americans don't even know what pay-as-you-drive car insurance is.