Do insurance companies share information? Since auto insurance companies usually look at the same factors to determine rates, it may surprise you to learn that insurance companies don’t share information. Instead, companies use the same reports to gather information about you, which is good news if you’re shopping for new coverage and don’t want your current company to know.
The tricky part is that not all auto insurance companies look at that information differently. So, for example, a ticket on your driving record may cause one company to charge higher rates, but another company may overlook it.
When shopping for auto insurance, it helps to know what insurance companies evaluate. Then, you can make changes to keep your rates as low as possible.
Keep reading to learn more about auto insurance companies sharing information and what factors determine your rates.
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What do auto insurance companies look for, and do insurance companies share information?
Insurance companies look at many different factors to calculate your rates, but do not share your information directly with each other. For example, when requesting a quote, you provide your age, vehicle, and ZIP code, and the insurance company can verify this information.
Your age is important because younger drivers lack experience behind the wheel and tend to be in more accidents. As drivers get older, rates decrease.
The insured vehicle also affects rates. For example, newer or more expensive cars cost more to repair or replace, so insurance rates are higher. In addition, drivers with a car lease or loan may have to carry more coverage, raising rates further.
Where you live influences your rates as well. Insurance companies charge higher rates in areas with a high theft rate since your vehicle is more likely to get stolen. Cities with a high traffic volume also have higher rates since you’re more likely to be in an accident.
Your driving record, claims history, and credit score also determines your rates. While you provide this information for your quote, the auto insurance company verifies your information by requesting reports from specialty companies.
However, these reports cost money, so the insurance company doesn’t run them often. Typically, insurers only request reports when you apply for new coverage or your policy is up for renewal.
You can request copies of any report with your information, which generally costs less than $12. If you get denied coverage because of a report, you can receive a copy of the report for free. If a report is incorrect, you can contact the reporting company to correct the information.
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What reports do auto insurance companies use to determine rates?
First, a car insurance company looks at your driving record or motor vehicle report (MVR). Your MVR details any accidents, tickets, or DUIs on your record. Although most states only include infractions for three years, some states keep records for 10 years.
How do auto insurance companies check your driving record? The companies request one from the DMV. However, there is a fee for each record.
Your driving record shows what kind of driver you are and whether you are likely to cost the insurance company money in the future. Risky drivers have much higher rates, and drivers with multiple infractions see rates skyrocket.
Next, your Comprehensive Loss Underwriting Exchange (CLUE) report shows all claims filed, accident-related or not. So, for example, if hail damages your car and you file a claim, it would show up on your CLUE report but not your MVR.
The CLUE report indicates whether you’re likely to make a claim based on the number of claims filed in the past. For example, if you file claims for minor damages, it can be a red flag to insurers that you are unlikely to pay for damages yourself.
Finally, insurance companies look at your credit report. Various factors determine your credit score, such as on-time payments, how many accounts are open, and what credit types you have.
Studies show that drivers with a higher credit score are more likely to pay for damages out of pocket and avoid filing a claim. Therefore, insurance companies save money and offer lower rates.
Additionally, a credit report shows if you’re likely to pay your bill on time.
How can you save on your auto insurance?
Now that you know what auto insurance companies look at to determine rates, there are ways to keep those rates as low as possible.
First, you can’t avoid your insurance company looking at your driving record. It’s best to be upfront with the company so that it doesn’t revoke your offer or cancel your policy.
The good news is that you aren’t penalized for poor driving forever. Every few years, infractions come off of your driving record. So if you avoid adding new accidents, tickets, or DUIs, your record can be clean again in a matter of years.
In addition, every company looks at your driving record differently. If you only have one offense, the insurance company may be willing to overlook it and not charge higher rates.
Next, avoid filing a claim if you can pay for repairs yourself. Keeping your CLUE report clean is also important to keep rates low. While damages may be expensive to repair, it may be cheaper to pay out of pocket rather than suffer high insurance rates for years.
Finally, increase your credit score. Make good choices on how you use your credit and pay your bills on time. For example, think carefully about signing up for another credit card.
You can receive a free credit report annually from a reporting agency such as Experian. Go through your credit report each year to ensure the information is correct. Not only will you save on insurance, but you’ll get lower rates on other purchases such as a car or mortgage.
Although these changes take time, they also make a big difference in auto insurance rates. Request copies of these reports to begin the process today.
The Bottom Line: Do insurance companies share information?
Auto insurance companies don’t share information directly, though companies typically get it from the same places.
When choosing an auto insurance company, it’s best to compare quotes to find the best deal.
When you request a quote, you give information, including your age, vehicle, and ZIP code. While those factors determine rates, they aren’t the only ones.
Your driving record, claims history, and credit score also affects your car insurance rates. Do insurance companies share information about these things with each other? Usually, auto insurance companies request these reports at renewal or when you sign up for a new policy.
Your MVR, CLUE report, and credit history all give the auto insurance company valuable information about you as a driver and whether or not you’re going to cost it money.
Your MVR indicates if you are a high-risk driver, the CLUE report shows how likely you are to file a claim, and the credit report shows if you’ll pay your bill on time.
However, not all states allow insurance companies to use credit scores to calculate rates. Some states like California have made it illegal for insurers to use your credit score to determine rates.
If these reports are negative, you’ll see higher car insurance rates. However, there are ways you can clean up those reports and lower your rates.
Obey traffic laws, avoid filing claims if you can pay for repairs out of pocket, and use your credit wisely to get the lowest auto insurance rates possible.
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