Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • A car insurance company uses your personal information to set your personal auto insurance rates
  • Your driving record, accident history, licensed history, and insurance history are all factors that are used
  • Insurance companies will always verify the important information that you provide on your application
  • One of the ways that information is verified is by accessing an electronic exchange database called C.L.U.E
  • Most licensed insurers enter claims information and policy information in C.L.U.E. to share information

It’d be really difficult for insurance companies to assess risk if all they had to go by was an applicant’s word. It’s nice to think that most Americans are honest people, but the fact of the matter is that there’s a huge number of people who would lie if it meant saving money on their auto insurance.

If carriers didn’t verify driving records and accident histories, everyone would be paying preferred rates and carriers would never be profitable.

The only way that insurance providers in the car insurance marketplace can profit is to assess risk thoroughly. This means that every application has to be reviewed by a real life underwriter to spot inconsistencies and missing information.

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Most of the information can be verified electronically. Here’s how insurers work with each other to share information:

What is your personal information used for?

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A personal car insurance company would never be able to make money if it could sift through all of the drivers to determine which ones they wanted to insure and which ones they didn’t.

This is why standard companies started the process of rating drivers and underwriting policies to ensure that the ratings first given were correct.

Your personal information is used to determine how likely you are to file any type of claim. Since claims cost insurance companies money, those who are statistically more likely to file a claim will pay more for their coverage.

If the statistics show that the driver is a low risk, they’ll be given what are called preferred premiums. Sometimes, personal information is enough to make you ineligible for coverage through a provider.

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Which rating factors affect car insurance premiums?

There are factors that don’t matter at all when you’re applying for car insurance. You’re never going to be asked what color your car is, if you wear contacts, if you’re left-handed, or what your license plate number is. You will, however, be asked for a lot of other information.

All of the information that the agent asks you for is relevant. It’s information that will have some sort of impact on your premiums or your eligibility for coverage.

Every answer you provide could move you from a preferred or standard risk class to a high-risk class. Here are the most common rating factors that the actuaries use when pricing policies:

  • Age of the driver
  • Years of driving experience in the US
  • Gender and marital status
  • Vehicle type and body style
  • Vehicle safety features
  • Vehicle ISO symbol
  • Registered owner of the vehicle and title status
  • Driving habits (time of day, purpose, annual mileage)
  • Driving record of all drivers on the policy
  • Accident record of all drivers on the policy
  • Named insured’s insurance history
  • Named insured’s credit-based insurance score (in some states)
  • Address where the vehicle is parked overnight

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Do you have to agree for the insurer to pull up your records?

You shouldn’t ever falsify the information that you put on your insurance application. No matter how careful you are, the truth will come out and it will work against you in the long run.

Insurance companies won’t just issue a policy because what you’re saying looks good. Even agents who write policies for their family members have to send the application through the underwriting process. You’re going to be given a lot of documents when you first apply for coverage.

Sometimes, you’ll be asked to submit an electronic signature and others you’ll get the physical paperwork. Whenever you sign, you are saying you’ve looked through all of the terms, the conditions, and the disclosures and you don’t have a problem with any of it.

One disclosure that you sign gives the company consent to pull up your information electronically. The disclosure will probably even tell you what databases or sources the carrier uses if it’s required by law in your state.

When you sign this, you agree that the carrier can access your information to price your policy. You also agree that your information can be shared with other companies in the future.

How does the company verify your driving record?

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The first thing most underwriters review is your driving record. It’s easy to forget if you’ve had a ticket and when the ticket was issued.

If you were cited and then convicted of a moving violation, the insurer wants to know when it actually happened. Companies can only surcharge you for 36 months after the conviction date.

To find out if you’ve had an infraction, the insurer will enter your license number into the state’s motor vehicle agency database. They will have to pay to run your report but the money spent it worth it if they find hidden infractions that are chargeable.

Having too many hidden violations could lead to cancellation of your new policy.

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Is there a way for carriers to see your past claims information?

Claims records aren’t always found on motor vehicle reports because a majority of accidents aren’t reported to the DMV. It’s necessary for insurance companies to share information to rate policies accurately and that’s why the Claims Loss Underwriting Exchange database was developed.

CLUE is an electronic system that all insurers can input claims information into. They can also request information about past claims and how long a client has had insurance through a carrier. If you want to see what’s on your CLUE report, you can order your own copy only and review it.

There’s not a need for clients to constantly ask their agent to write a Loss History report when they want to switch insurers.

Now, with the Internet, it’s possible to verify information and share it in the blink of an eye. If you want to shop around for coverage and you don’t want delays, use an online rate comparison tool and get a handful of quotes in a few minutes.

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