How are Insurance Risk Scores Calculated?

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Insurance can be one of the most confusing parts of a fleet manager’s job. Fleets are always looking to save money when it comes to fleet insurance, and there are various ways to do so. Knowing how insurers calculate risk scores is key in determining how your fleet can save money on its insurance premiums. Insurance premiums are an expensive part of a fleet’s budget, so anywhere you can cut costs is a huge benefit to the team. Find out how insurance risk scores are calculated so you can start saving today! 

What is an Insurance Risk Score?

Insurance companies use insurance risk scores to determine how likely it is that an individual or company will file a claim with them. They utilize statistics to determine these scores, assigning positives and negatives to specific attributes about your fleet. These attributes are based chiefly on the likelihood of an accident or claim. 

An insurance risk score ranges from 200 to 997, with higher scores being better. Anything over 770 is considered a good score. Higher scores result in lower insurance premiums. 

How are These Scores Calculated? 

Insurance risk scores are based on a variety of factors. Although your credit report is a significant factor, driver behavior must also be considered. Unlike a credit score, insurers are not checking your ability to pay back a loan. They look for a variety of factors, including: 

  • Long established credit history
  • Numerous open accounts in good standing
  • No late payments
  • No past due accounts
  • Low use of available credit
  • Collection accounts
  • Driver behavior
  • Local factors such as traffic congestion and weather conditions
  • Historic accident risk

How Can I Find Out My Insurance Risk Score?

Every company has its own method of calculating insurance scores, and it is not the same between each company or even each state. This is why it can be challenging to know your insurance score at a given time. However, you can find out your insurance score if you go to a traditional credit reporting agency such as Experian, Equifax, Credit Karma, or TransUnion. If your fleet management software integrates with your insurance plan, you can find out your insurance risk score that way as well. 

Why are Insurance Risk Scores Used to Calculate Premiums?

It makes sense that driver behavior and other driving-related risk factors are considered when deciding your insurance premium, but why your business’s credit history? It turns out there are studies that prove the financial affairs of a company or individual are good indicators of claim risk. For example, those in a poor financial situation are more likely to fraudulently make claims to try and make a profit or get repairs that policies may not otherwise cover. Of course, this is not necessarily the case, but it is a worry that insurance adjusters have. 

Improve Your Insurance Risk Score With Azuga

Azuga offers a variety of features that will help you improve your insurance risk score. Dash cams, maintenance alerts, and fleet tracking all serve to improve your fleet’s insurance rates and save your business money. These features enhance the safety of your fleet and make it less likely that you will have to file a claim. Your fleet is much safer and saves a lot more money in Azuga’s hands, so try out a demo today and see for yourself what benefits await you!