Allstate’s Use of Credit Information to Evaluate Insurance Policies
Understanding your insurance score
We realize that our rating process may be unfamiliar to some of our customers, so we’ve put this summary together to help you understand:
- Why Allstate uses certain elements from your credit history
- How this process may affect your premium
- What measures we’ve adopted to keep your personal information safe.
Our use of credit information enables us not only to offer lower premiums to many customers who otherwise would pay more for their insurance; it also allows us to provide insurance coverage to more drivers and homeowners than we previously could.
How do we determine your rates?
Before determining your rates, Allstate considers many pieces of information, such as your coverage limits, your loss history, where you live or, for auto policies, where you keep your car. For example, if you applied for an auto policy from Allstate, to determine your premium we would consider such factors as:
- What type of car you drive: How old is it? What safety features does it have?
- Who drives the car: What is the age, driving record and gender of each driver?
- How you use the car: How far do you drive? Do you use the car to commute or for pleasure? Where do you keep (garage) your car?
We also consider your insurance score, a calculation based on elements from your credit history. Over the years we’ve found that including insurance scores helps us better predict the likelihood of experiencing an insurance loss. This helps us match our rates to the risk we’re assuming.
What is an insurance score?
Your insurance score is different from your credit score. For example, a mortgage company uses your credit score to determine your credit worthiness and your ability to pay your mortgage. It’s important to understand that while Allstate uses certain elements from your credit history, we never see your credit score, and we’re not evaluating your overall credit worthiness. We simply use elements from your credit report that have proven effective in predicting insurance losses. We calculate your insurance score using the following types of information:
- Your payment history: Have you made late payments or missed a payment?
- Length of credit history: How long have you been using credit?
- Your current balance on each account compared to your highest balance: For example, if you had high credit card balances before are they lower now?
- Number of credit accounts: How many accounts do you have? This may include credit card accounts or installment loans.
- Credit inquiries: How often have lenders made inquiries into your credit report? This does not include “soft inquiries,” such as when a company reviews your credit report to make a promotional offer. (Credit inquiries are not used in all states.)
- Bankruptcies, foreclosures and other collection activity (Bankruptcy information is not used in all states.)
Please keep in mind that the types of credit information we consider when calculating an insurance score can vary from state to state. Should you have any questions regarding Allstate’s use of your credit history, particular to the state you live in, please contact your Allstate representative or call 1-800-ALLSTATE.®
The length of time that we look back over your credit history varies. For inquiries, we review the past two years; for other credit variables, we review the past five years (except in Maryland). Only the length of your credit history is considered for more than five years and this generally has a positive effect on your insurance score.
Allstate understands that people sometimes face difficult circumstances, such as job loss, divorce, or large medical bills. We consider many factors when determining an insurance score, so a single negative event does not necessarily mean you will get a higher than average premium. It’s possible that a negative event, such as a delinquency, may be offset by other positive factors like a long credit history.
In addition, please remember that although certain types of inquiries in your credit report can adversely impact your insurance score, not every inquiry will have this effect. For instance, in determining your insurance score, we do not consider:
Account review inquiries
Inquiries you make yourself in order to get a copy of your credit report, or
Inquiries Allstate or any other insurer initiates to review your credit history for insurance purposes.
For more information about insurance scores, you may want to look at the Insurance Information Institute Web site at www.iii.org. The Insurance Information Institute is not affiliated with Allstate but can provide you with information about how insurance scores are used across the industry.
Why does Allstate use credit information?
Since the 1980s, Allstate has used credit information as a way to evaluate insurance applications. Since then, our experience has confirmed that people with better insurance scores tend to have fewer insurance losses. There is no definitive explanation as to why this is true, but our experience insuring millions of cars and homes confirms the predictive power of credit information. Since 1999, we’ve leveraged all that we’ve learned about credit information from our research and experience to help us set rates.
Our rating system is one of the most sophisticated in the industry. By including insurance scores in the rating formula we’re better able to identify the insurance risk each individual represents. Instead of assigning all of our customers to a few, broad rating groups, we are able to make finer distinctions and offer more rating groups. This lets us offer customers rates that are more closely aligned with their likelihood of insurance loss. Ultimately, we are able to insure more people using these methods.
Does Allstate’s scoring model consider ethnicity or income?
No. None of the insurance scoring models we use consider ethnic group, religion, nationality or income.
Can insurance scores change over time?
Your insurance score is a snapshot at the moment the credit report is ordered of how you’ve used credit over a span of years. Because there are so many complex considerations involved in calculating your insurance score, even if you change some behaviors, it may not have the effect you want. However, we do recommend that you regularly review your credit report for accuracy, pay your bills on time, and only open new credit accounts as needed.
For more information about insurance scores, managing personal finances and your credit rights, we encourage you to visit the Federal Trade Commission Web site at www.ftc.gov.
At Allstate, we’re continually reviewing and refining our system for calculating premiums. Considering a customer’s insurance score is just one more way we’re working to keep our customers in Good Hands.®
What about people like me who use credit cards responsibly?
The use of credit cards can have a positive effect on your insurance score, if you are not delinquent in your payments or significantly overextended. The presence of reasonable balances on credit card accounts is common among customers receiving our best scores. It’s important to remember that the presence of any one characteristic will not necessarily prevent you from getting a lower rate.
We’ll keep you informed
At Allstate, we think you should know how your credit information is used as well as its impact on your premium. We’ll let you know if you don’t receive our lowest premium based on your insurance score. You’re also entitled to an annual, free copy of your credit report from consumer reporting agencies, and we suggest you review it so that you can make sure it accurately reflects your credit history. If it doesn’t, we encourage you to contact Trans Union – the consumer reporting agency we obtain credit reports from – and request a correction.
You can contact Trans Union at:
Trans Union National Disclosure Center
2 Baldwin Place
P.O. Box 1000
Chester, PA 19022
The credit report that Trans Union sends you will include a form that you can complete if you feel any of the information is incorrect.
We protect your privacy
We know your credit information is highly personal and needs to be protected. Your insurance score is generated by a secure computer system. Your agent will never see your credit report; neither will the call center representative who takes your call. No one at Allstate sees your credit report unless you request additional information about our decision that requires us to personally review your report. Even then, there’s only a small, select group of employees who have access to your credit report and who will examine your credit information to address your concerns.
For more information, view our privacy statement at www.allstate.com/about/privacy-statement-aic.aspx.