Answers to some of your common car insurance questions.
Auto Insurance 101
Questions you may have about insurance risk indicators.
When it comes to insurance, we know you want quality coverage from a solid, dependable company. You want the peace of mind that comes with knowing that, in the event you need us, we'll be there to help you get your life back to where it belongs quickly, compassionately and with as little hassle as possible. And you feel, rightfully so, that if you are a good risk, you should be rewarded with lower insurance costs. We understand that you want all of the above at the best price possible. At Farmers, we are always looking for new ways to keep the cost of insurance affordable. To do this, we use a tool called the Risk Assessment Indicator.
Is a Farmers Risk Assessment Indicator?
A Farmers Risk Assessment Indicator is a code developed from and based upon credit report information. Depending on the kind of policy, Farmers' underwriters may use this indicator along with motor vehicle records, loss reports and/or other information to rate auto and/or homeowner insurance policies. Risk Assessment Indicators are highly predictive of future claims activities, and the use of indicators allows Farmers to charge customers a rate that is appropriate to the risk insured.
Risk Assessment Indicators are based on information from consumer credit reports from one of three institutions: LexisNexis Consumer Services, Equifax or CSC Credit Services.
Information used may include:
What's not included in a Risk Assessment Indicator? (Risk Assessment Indicators do not use the following information...)
Who at Farmers has access to my credit information?
We believe in your right to privacy. Your agent and members of the agency staff do not have access to your credit file. You can, however, obtain a copy of your credit report from the consumer reporting agency that provided the information used to calculate your Risk Assessment Indicator.
Why does Farmers use Risk Assessment Indicators?
Industry experts have proven that a strong correlation exists between credit history and insurance risk. Because credit history is generally accepted to be a fair and accurate way to predict probability of future loss, Farmers Risk Assessment Indicator uses credit data to determine discount availability for applicants and customers. Please keep in mind that this is only one of several factors used in determining your premium.
Can I improve my RAI and, if so, how?
You can improve your indicator over time by using credit responsibly. A Risk Assessment Indicator is a snapshot of your insurance risk based on information in your credit report. It's a good idea to periodically obtain a copy of your credit report from the major credit bureaus to check for any inaccuracies.
Farmers recommends that if you need assistance with understanding your credit history or advice on using credit responsibly, you should contact a qualified credit counselor. Farmers Agents and employees are not qualified credit counselors.
What if I don't get the best discount as a result of my Indicator?
The Federal Fair Credit Reporting Act (FCRA) requires that we tell you if we take adverse action based upon information contained in your credit report. We will give you the name of the credit bureau that provided the information and advise you of certain rights you have under the FCRA so you can address any errors that might appear on your credit report.
What if the information in my credit report is wrong
If you find an error in your credit history, you should report the error to the credit bureau. The credit bureau must investigate and respond to your request. Once you are certain that your report has been updated, please contact your Farmers agent. Your agent will re-order a new Risk Assessment Indicator. Farmers will apply any changes to your premium. Make sure the information in your credit report is correct by reviewing your credit report from each credit bureau at least once a year. Call these numbers to order a copy (a fee may be required):
How do insurance companies assess risk?
There are a number of factors that contribute to how insurance companies, including Farmers, calculate the risk they’ll assume when offering coverage to a particular individual. Demographic information can impact the premiums you can expect to pay, as well as your driving record and your credit history*.
These and other pieces of data help create a bigger picture that underwriters use to determine how likely it is that you may get into an accident and, as a result, how risky you are to insure. The best way to understand how insurance companies assess risk is to talk to a Farmers agent today about any questions or concerns you may have.
*Where allowed by law.
How do I know if I’m considered a risk for auto insurance?
While certain behaviors, like reckless driving or multiple traffic violations, have more potential to increase your insurance premiums, the method Farmers uses to calculate your risk is based on a comprehensive, proprietary formula.
We compile information from a variety of sources to determine the probability you’ll get into an accident, as well as the level of your individual potential risk. Talking with your Farmers agent is the best way to determine whether you may, or may not, be considered a risk for auto insurance.
Q: My car is almost 10 years old. I’m not sure if I should still carry both comprehensive and collision insurance. Actually, I’m not even sure what the difference is between them. Can you help me make sense of them?
A: Also referred to as "physical damage coverage," comprehensive and collision coverage help repair your car after a covered loss. Comprehensive or "comp" coverage generally reimburses you when your car is damaged from theft, vandalism, fire or hitting an animal…or if your vehicle is damaged from weather-related events like hail. Collision coverage provides coverage when damage occurs to your car while moving, parked or struck by another vehicle.
– Theresa Geving, a Farmers Insurance® agent based in Overland Park, Kansas.