Credit Scores and Underwriting.

Why do personal lines insurance underwriters, utilize credit scores?

Personal lines insurance underwriters often use credit scores as a factor in determining insurance premiums because studies have shown that credit scores can be predictive of insurance risk. In other words, individuals with lower credit scores may be more likely to file insurance claims than those with higher credit scores.

This is because a low credit score may be an indicator of financial stress or instability, which could lead to riskier behavior and potentially more insurance claims. On the other hand, individuals with higher credit scores may be more financially stable and therefore less likely to file claims.

While there is some debate over the use of credit scores in insurance underwriting, it is a common practice in many countries. It's important to note that credit scores are just one factor that underwriters consider when assessing risk, and they typically use a combination of factors such as age, driving record, and claims history to determine insurance premiums.