Arkansas' Insurance Dept. Validates TransUnion's Position on the Benefits Credit Information Brings for Pricing Premiums
CHICAGO, IL--(Marketwire - September 27, 2010) - Eighty-eight percent of consumers either received a lower insurance premium or their premium was unaffected when personal credit information was used to determine pricing, according to a recent report from the Arkansas State Insurance Department. This report further validates TransUnion's position on the benefits that consumers receive through the use of credit information within insurance pricing for homes, automobiles and recreational vehicles.
"The conclusion reached by the Arkansas State Insurance Department reinforces TransUnion's and the industry's position that credit scores are a useful, unbiased tool for insurers to appropriately price their products," said Geoff Hakel, group vice president, TransUnion's insurance business unit.
The July 8 report, "Use and Impact of Credit in Personal Lines Insurance Premiums Pursuant to Ark. Code Ann" includes data compiled by the state's annual survey to all insurers that use consumer credit information to write personal lines insurance products. The survey found that in 2009, there were 3,393,061 personal insurance policies written or renewed that involved the use of credit as a factor contributing to the final premium (almost 97 percent of total state volume). Additionally, the study found that:
- The premium for 39 percent of policies decreased, while 12 percent increased as a result of the use of credit. For the remaining 49 percent, credit served as a neutral factor and did not contribute to or change the final premium that was extended to consumers. (For those with an increase, federal law provides that the consumer be informed of the reason based on information in their credit report and they are entitled to a free credit report.)
- The number of policies decreasing in premium due to insurance scoring outnumbered 3.3 to one from policies increasing in premium.
- For private passenger automobile insurance, there were 2,278,773 policies written or renewed in 2009 that involved the use of credit as one of the factors contributing to the final premium. Additionally, 43 percent of the policies resulted in the premium being decreased.
- For homeowners insurance, 623,461 policies were written or renewed in 2009 that involved the use of credit as one of the factors contributing to the final premium. Additionally, 38 percent of the policies resulted in the premium being decreased.
"The use of credit scoring will continue to benefit Arkansas consumers and consumers in other states where this proven practice is permitted by helping provide lower premiums for home and automobile insurance, especially given the slow economic recovery," continued Hakel.
TransUnion was first to establish best practices for the use of credit information in the insurance industry. These educational guidelines are used by insurance carriers to explain both the use and benefits of credit scoring on individual premiums and for the industry as a whole. In addition to these guidelines, TransUnion's Insurance Risk Scoring solutions are designed to assist insurance carriers in making better decisions, which ensures that consumers get the rates they deserve.
As a global leader in credit information and information management services, TransUnion creates economic and competitive advantages for businesses and consumers. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering comprehensive solutions that leverage data, advanced analytics and decisioning technology. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Founded in 1968 and headquartered in Chicago, TransUnion employs associates in more than 25 countries on five continents. www.Transunion.com
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