Your Record Drives Underwriting

I did know that it plays a role in life insurance underwriting: after all, applications ask for your driver’s license number, and I’ve seen cases where really bad records result in less favorable underwriting results (which means higher premiums).

But I didn’t know that it also comes into play when underwriting homeowner’s (and, one presumes, tenant’s) insurance, too:

“Allstate, meanwhile, is using driving records to help price home insurance. The company began doing so in 2011 in Oklahoma … Home insurance prices are based mostly on a home’s reconstruction cost and location. Allstate started looking at driving records to learn about homeowners’ behavior.”

To be sure, this makes sense: if you’re prone to risky driving behavior, you’re probably not going to be the most careful homeowner:

“Poor home maintenance or careless security can lead to damage and home insurance claims.”

Which also makes sense.

But as it turns out, that doesn’t really matter:

“Insurers don’t have to explain why certain behavior leads to claims. They only have to show a correlation between the variables and claims.” [ed: emphasis in original]

Heh.

Now, this practice isn’t widespread – yet – but don’t be surprised if your homeowner’s insurer runs a motor vehicle report at renewal time.

And drive safely.

[Hat Tip: ‏@LexisInsurance]