Credit Score and Insurance: How Are They Related?

Credit score and insurance are very much related. Insurance providers may utilize your credit history while you are going for new home or automobile insurance. This article would give you some useful details that would help you know in what manner your credit score is utilized by the insurance companies.

What Is the Credit Score that Insurance Providers Prefer?

A credit score is basically a picture of your credit at a particular moment. The details of your credit history and your application for insurance are taken into account by the insurance providers for determining a particular credit score. This is known as insurance credit score and it ranges from 0-999. A higher insurance credit score suggests a better score.

How Your Credit Score is Utilized by the Insurance Providers

If an insurance company is dependent on credit score, it can utilize your credit score for the purpose of underwriting and ascertaining the amount of premium payable by you.

Underwriting is the procedure of determining whether a new policy can be issued to you or a current policy has to be renewed.

Rating is the procedure that decides the amount of premium that you need to pay for insurance. Besides the usage of credit details, insurance providers would utilize other conventional rating elements to figure out the premium that is payable for your home or automobile insurance policy. A few of these conventional rating elements include the following:

Homeowners insurance - your claim history, your residential address and the replacement cost of your home.

Automobile insurance - your residential address, type of car that you have and your driving history.

How Would You Know Whether Your Credit History has Influenced Buying of Insurance?

FCRA (The Fair Credit Reporting Act) necessitates insurance providers to inform consumers if any unfavorable step has been taken due to their credit details. FCRA delineates unfavorable steps to include raising of premiums, refusing or terminating coverage, altering the amount of coverage or the terms and conditions in such a manner that it causes harm to the consumer. The insurance provider should also let him know the name of the countrywide credit bureau that provided the details.

Instances of an unfavorable step include the following:

• Termination, refusal or non-renewal of coverage
• Restricting advantages like eligibility for dividends
• Not offering the consumer the cheapest rate
• Not offering the consumer the most attractive discount
• Providing the consumer an incomplete type of coverage
• Providing coverage for something else that was not asked for
• Addition of a premium surcharge

ICICI Bank awarded ‘best bank’ for NRI Services

ICICI bank the largest private sector bank and the second largest bank in India, NRI services has won the World Finance (London) award for the best bank for offering NRI Services Worldwide, 2008. The bank has also been judged best for its remittance business segment for the second year in a row by the Asian Banker Magazine.

According to Girish Nayak, head of ICICI Bank NRI Services bank’s main international strategy has been the NRI footprint.

Nayak explained, "ICICI Bank helps NRIs maintain the all-important link with their home country by offering a complete product suite that is available at the click of a mouse or a simple phone call away. The Bank is always innovating new products to stay a step ahead of the NRI needs and maintain its leadership position as the NRI Banker of choice”.

In 2001 ICICI Bank launched its NRI Services as a one-stop shop to address the home-linked financial needs of NRIs. The product suite offered include a variety of savings and deposit products, structured investment options, online remittances, mortgages, insurance and equity-linked products addressing the entire gamut of financial needs of this overseas community.

ICICI Bank is having a global presence and a rich customer base spread across 18 other countries, through its combination of subsidiaries, branches and representative offices. The bank is having has a presence in the UK, Canada and Russia through wholly owned subsidiaries.

Product distinction includes a premium product called – NRI Edge targeted at affluent NRIs looking for priority services and exclusive privileges. Other specialized products being offered include a card-based remittance account for with drawing down money transfers at the India ATMs and the Easy Receive a beneficiary-focused account customized for NRIs' family members in India with linked benefits.

ICICI Bank first started a foreign exchange forwards linked product called Rupee Plus. The product is a risk free and an opportunity to earn significantly higher returns on NRI investments. 100% principal and return protection is offered by this product.

For NRIs Money Transfers is a core need therefore ICICI Bank is offering state of the art technology enabled speedy and low-cost options to NRIs. Customers from the overseas ICICI Bank offices are able to initiate instant payment to their accounts in India. Customers also get the facility to transfer funds from their ICICI Bank India accounts to any other bank account efficiently at no additional cost using the online platform.

PSBs, car companies signing agreements with a hope to push sales

From the last six to seven months automobile industry has been facing slump in demand but as the banks have started reducing interest rates on auto loans the automobile companies are trying to take full advantage of this. The auto companies are getting into tie-up with public sector banks (PSBs) to offer cheaper finance to the buyers to push their sales.

Except for State Bank of India, PSBs, which are having less than 20 per cent share in the auto finance business, are signing these alliances with a view to attain a bigger share of the pie.

SBI, and other banks such as HDFC Bank, Axis Bank, ICICI Bank and Kotak Mahindra Bank all account for 75 per cent of the market share.

Recent tie-up between banks and auto companies include Punjab National Bank (PNB) and Syndicate Bank with Hyundai Motors, Andhra Bank and Bank of Baroda with General Motors, Central Bank of India and Corporation Bank with Tata Motors, Punjab and Sind Bank and Corporation Bank with Maruti Suzuki.

Besides lower interest rates, some of the deals offer facility of lower margin money. Along the retail tie-ups, many auto dealers have also signed up with country’s largest lender SBI.

Hyundai Senior Vice-president (marketing and sales) Arvind Saxena stated, “The rates offered by public sector banks are much more attractive than the ones offered by private sector players. In addition, these banks have a wider reach across the country. The share of PSU banks in our sales has risen to 30 per cent from 18 per cent earlier”.

Auto makers also stated that now the processing time required for a vehicle loan by a public sector bank has also reduced.

General Motors India Director and V-P (corporate affairs) P Balendran informed, “Private sector banks had a market share of 70 per cent while PSU banks had a share of about 10-15 per cent and the balance was in cash. PSUs’ share has gone up to 35-40 per cent as of today. Speedier processing of loans by PSU banks has also helped them gain market share besides lower interest rates”.

In February Maruti Suzuki, a leader in the passenger car segment, had sold 70,625 vehicles, thus an increase of 19 per cent over same period last year. According to auto analyst with equity broking house maybe this is an indication of change in the business sentiment.

Public sector banks (PSB) are also seeing opportunity in signing these tie-ups as this can help in filling the gap in the financing market ever since private banks reduced their auto finance portfolio considerably. PSBs have the advantage of a huge network especially in the rural sector which has not been much impacted by slowdown.

But while sanctioning loan banks are scrutinizing a loan application very carefully.

According to credit head of small public sector bank, “Even if tie-ups are in place, it does not mean that branches would start work is gusto. They will make doubly sure that credit proposal is going to be sound to avoid for containing increase in incidence of bad loans”.

ICICI bank customers’ credit card disputes settled in Lok adalats

On Sunday in New Delhi in five district courts 100 Lok adalats were held. This was made possible with a unique collaboration between ICICI bank and Delhi Legal Services Authority. The purpose of these Lok adalat was to settle long pending cheque bouncing and recovery cases.

During the proceedings the defaulters gave their card numbers, therefore the details were then forwarded to the Lok adalat. The hearing of issues was heard in the presence of a magistrate and the bank officer.

A customer expressing his satisfaction said, "I like the concept because at least I was able to talk to the bank officer and they assured me that the matter will be settled. I'm relieved now”.

While another customer satisfied with the procedure said, “My cheque had bounced and my cash payment was not reflecting. Now the issue is being addressed. It’s good because I could avoid the harassment of the court.”

Thousands of ICICI bank customers across the city long pending bank disputes were settled in the day-long proceedings without getting into the legal rigmarole. But obviously, it was not a happy experience for everyone.

One of the unhappy customer complained, “I have been here since morning and they've been directing me from one room to the other. It is a useless concept.”

The bank had already computerized data relating to the 1.1 lakh cases pending in different lower courts therefore all the proceedings at the Lok adalats took place online.

After the settlement of the dispute, the orders of the Lok adalat will be dispatched to the concerned courts. Approximately 40,000 customers contacted the bank and settled their cases outside the court.