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Do Insurance Companies Share Information?

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Joel Ohman
Founder, CFP®

UPDATED: Mar 13, 2020

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Insurance Q&A: “Do insurance companies share information?”

They sure do, but not in the manner you may be thinking. Insurance companies don’t contact one another to discuss an individual’s motor vehicle records and insurance claims history in order to determine their rates for coverage.

(How are car insurance rates determined?)

Rather, virtually every insurance company “subscribes” to a service and purchase reports one at a time for underwriting and pricing purposes. It’s all done electronically these days.

These reports are ordered and applied “in the background” while your policy is being rated using an insurer’s computer software.

Insurers spend BIG dollars every year “ordering” these reports, which depending on which state you reside, can cost as much as $7.00 each.

It doesn’t sound like much until you take into account a particular insurer may have to order several thousand per day, and certainly don’t sell every policy they quote.

What Reports Are Available?

Your motor vehicle record (MVR) and CLUE report are the two most common records dug up to determine if a particular company will insure you, and if so, how much they’ll charge for coverage.

And it’s becoming increasingly more common for credit history, known as an insurance score in the industry, to be used as well.

Your insurance score can result in as much as a 35% swing in your insurance premium, so it’s hugely important!

(Credit scores and car insurance rates)

Is There Any Way Around It?

If you are hoping to change insurance companies to “get around” a ticket or an accident, you’re likely out of luck. The entire purpose of these reports is to make sure (as accurately as possible) that an insurer is collecting the correct premium based on the risk you represent to their bottom line…in the form of insurance claims.

The more tickets and accidents you’ve got on your record, not to mention the less perfect your credit history, the more risky you are to the insurer.

More Risk = Higher Premium

There are some companies out there that will take your word for it when asking about claims history.

But you will only find this with the true non-standard insurance companies and it doesn’t necessarily lead to a lower premium, as they price accordingly. Which means they “build in” premium to every policy, as they assume their clients fit the non-standard program for a reason.

Am I Stuck With A HUGE Premium?

Maybe not. You may still get better deal by getting online quotes and visiting a local independent insurance agent who represents several insurers.

Each insurer has a different “risk appetite,” which means they may actually be seeking to insure someone with a less-than-perfect driving history. You won’t know until you try.

Rates are low at the moment, so switching insurance companies could save you a lot of money!

Read more: 10 ways to lower your car insurance premium.

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