How and Why Progressive Uses Insurance Scores
How does Progressive use insurance scores?
Like other insurers, Progressive uses insurance scores and other underwriting tools and rating variables to place customers in groups, determine potential insurance claims risk for those groups, and calculate accurate rates based on the potential risk that each group represents. Progressive does not use information about credit history solely to refuse to insure a customer or to cancel a policy. In fact, our use of insurance scores has allowed us to offer lower rates to more customers.
Why do Progressive and other insurers use insurance scores?
Credit has been proven to be a very powerful and independent predictor of future accidents or insurance claims. The use of credit history provides an additional predictive factor — one not offered by other factors such as driving record, vehicle type, age, etc. In fact, Progressive data shows that consumers with the worst insurance scores are twice as likely to have an accident or insurance claim as those with the best scores.
The following studies offer more information on the relationship between credit history and the likelihood of having a future accident or insurance claim:
- EPIC Actuaries, LLC: The Relationship of Credit-Based Insurance Scores to Private Passenger Automobile Loss Propensity (PDF 308k)
- The University of Texas Study: A Statistical Analysis of the Relationship between Credit History and Insurance Losses (PDF 162k)
Do all insurers consider credit information when pricing vehicle insurance?
Most do. According to a 2001 survey by Conning & Co., a research firm based in Hartford, Conn., 92 percent of insurance companies used credit information when rating or underwriting new policies. As of early 2006, every top five auto insurance company was using credit to rate or underwrite new policies.
How does Progressive determine rates?
Progressive, like other insurers, groups customers based on similar characteristics, evaluates their claims experiences within these groups, and determines what to charge individuals with characteristics similar to members of the group. We charge a higher rate for customers more likely to have claims, and a lower rate for customers less likely to have claims.
An insurance score is just one of many factors Progressive considers when determining rates. Depending on the state, we also consider your driving record, type of vehicle, where you live, your gender, your age and other factors.