Do auto insurance companies do background checks?

Your background can affect several different aspects of your life. From getting a job to qualifying for a license, having blemishes on your criminal and credit reports can negatively impact your future.

Insurance policies are one of the few products you’re typically required to purchase. Since auto insurance is mandatory in most states, you need to know how your background affects your rates and even your ability to find insurance coverage.

Do car insurance companies check criminal records?

Auto insurance companies run various reports to determine how risky you are to insure. High-risk drivers pay more for coverage than drivers with a clean background.

Each state has different laws about what an insurance company can look at or consider when qualifying consumers for insurance. Keep reading to learn how auto insurance company background checks affect rates.

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What happens when you get auto insurance quotes?

Auto insurance quotes are estimates. They help consumers shop around and price how much a specific amount of insurance will cost on a particular vehicle.

While technology has made it possible for insurers to give consumers accurate quotes instantly, you still have to be forthcoming when you’re soliciting quotes.

Auto insurance agents and quoting tools will ask you for information to rate you properly. 

You will have to know the following information:

• Vehicle type

• Mileage

• How much coverage you want
• Violations reported on your driving record

While information is eventually verified, the agent won’t run any reports until after you’ve applied for the policy. (For more information, read our “Are auto insurance companies allowed to charge a policy fee?“).

What is the underwriting process?

Once you’ve compared several different quotes, you can decide which policy offers you the best value. After you’ve made your final decision, the next step will be to submit your application to the company.

The car insurance company will then assign your application to an underwriter to start the underwriting process.

Underwriting is the process of assessing risk and verifying the rating information before a company issues a policy.

The insurance company has a certain amount of time during the application process to either issue the policy or terminate the policy due to the information provided. This period is called the binding period.

States usually require companies to complete the binding period within 60 days.

Do insurance companies do background checks?

During the underwriting process, the underwriter will run a motor vehicle report (MVR). Your MVR is used to assess your driving history and is essential for the insurer to evaluate your skill and determine if you are considered a safe driver. 

In the event you do not have a clean driving record, insurance companies could place you into a high-risk driver category.

Since companies can’t reasonably follow around each of their policyholders to grade their driving, running motor vehicle reports is the best alternative.

Read more: U.S. Underwriters Insurance Company Review

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What does a motor vehicle report include?

When you think about a background check, you might think about a criminal screening. Insurance companies might not check your entire criminal history, but your MVR can contain criminal offenses, such as traffic tickets.

These charges are most important to the insurer because they indicate risk. More risk equals increased rates.

Criminal traffic offenses found on an MVR include:

• Hit-and-run accidents

• DUI or DWI

• Reckless driving

• Driving without a license

Your MVR includes criminal traffic offenses, but it also provides information about your past minor traffic violations and accidents reported to the DMV.

The report shows the date of the offense/accident, conviction date, fault allocation, and total payouts.

Drivers with accidents, tickets, and DUIs or DWIs have higher auto insurance rates than drivers with a clean driving record. Likewise, multiple infractions can send rates through the roof.

For comparison purposes, this table shows average annual rates from top car insurance companies based on driving records.

Average Annual Auto Insurance Rates Based on Driving Record

While one accident raises your rates by around $80 a month, a DUI causes rates to increase by about $150 a month.

Insurance companies can require high-risk coverage if you have a very bad driving record. While this type of insurance offers the same coverage, rates are significantly higher.

The good news is that traffic offenses don’t stay on your MVR forever. While tickets and accidents typically come off your record in three to five years, criminal traffic offenses can stay on your MVR for up to 15 years, depending on your state.

What is a C.L.U.E. report, and when is it used?

Not all accidents are reported to the DMV. Some states have threshold reporting guidelines, which means that specific claims won’t show on your state MVR.

It doesn’t mean that new insurance companies won’t be able to see past claims that you’ve filed. This access to claims is why insurance companies have access to Claims Loss Underwriting Exchange (C.L.U.E.) reports.

A C.L.U.E. report includes data collected from all the licensed insurers in the marketplace. It’s an excellent tool for insurers to evaluate a driver’s claims history before any company extends an offer for insurance.

Auto C.L.U.E. reports include the following information reported in the last seven years:

• Policy type

• Loss date

• Loss type

• Loss status

• Amount paid

• Policy number

• Insurance company

Read more:

• How to Find Your Auto Insurance Policy Number
• Auto Insurance Policy Number: Insurance Explained

Pretty much all insurance companies run C.L.U.E. reports. You can run your own report for free to see what’s on it. If you notice that something is inaccurate, you should dispute the information as soon as possible.

You may also be able to contact the insurer directly to ask for a Loss Experience Report to give the information to the new company.

Since your C.L.U.E. report affects car insurance rates, it’s a good idea to carefully consider whether or not to file a claim. Although paying for damages yourself is expensive, it can be cheaper than paying higher auto insurance rates for several years.

Do insurance companies run your credit report?

Your credit history can affect job opportunities. This can include chances of landing a job, and it can also affect your insurance rates. Insurance companies are free to run your credit report to assess risk and place you into a risk class in most states.

Can you get car insurance with bad credit? You can’t be turned down for insurance because you have bad credit, but it can lead to higher rates.

Because studies show that drivers with low credit scores are more likely to file a claim and cannot pay for damages out of pocket, insurance companies charge higher rates.

In addition, your credit report indicates how likely you are to pay your bill on time.

However, not all states allow insurance companies to use your credit score to determine rates. Some states like California have banned the practice.

Insurance companies don’t use your traditional credit report as a credit card company or lender would. Instead, the underwriter will run your credit-based insurance score through a risk solutions company, like LexisNexis, to rate risk. (For more information, read our “Auto Insurance Score: What is it and why does it matter?“).

The report includes information on your credit, but it doesn’t have information that might be considered discriminatory in nature.

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Do car insurance companies check criminal records?

Your auto insurance company will sometimes run a criminal records check to see what shows up. Your criminal history indicates whether or not you are likely to cost the insurance company money.

While your MVR shows criminal driving charges, a criminal records check also shows other violations. These violations can affect auto insurance.

For example, if you are a convicted violent felon, you probably don’t care about following traffic laws. Or, if you’re a convicted kidnapper, you may use your car in the commission of the crime.

No matter the conviction, a criminal record shows a lack of concern for those around you. Therefore, auto insurance companies may be left paying hefty damages and bodily injury claims.

Each state and auto insurance company decides how far back your criminal record affects your rates. However, your background isn’t as necessary as rates are concerned at some point.

It should be noted that a criminal charge is different than a conviction. However, charges may still show up on your criminal record. Your insurance company decides if charges affect rates.

While insurance companies might not always run criminal records, they do pull several other relevant reports. Therefore, you should take the time to run your reports on your own and see what’s on your records. You can run these through your state and also through LexisNexis.

Case Studies: A Comprehensive Exploration of Case Studies, Regulations, and Industry Practices for Companies Doing Background Checks.

Case Study 1: ABC Insurance Company

ABC Insurance Company is a large national insurer known for its thorough underwriting process. To ensure accurate risk assessment, ABC Insurance Company incorporates background checks as part of its standard procedure. They conduct comprehensive checks that include reviewing an applicant’s driving record, claims history, credit score, and criminal background.

This information helps ABC Insurance Company assess the level of risk associated with an applicant and determine appropriate insurance rates.

Case Study 2: XYZ Insurance Agency

XYZ Insurance Agency is a regional insurance provider that caters to a specific demographic. While XYZ Insurance Agency acknowledges the importance of background checks, they do not conduct them on every applicant. Instead, they primarily focus on driving records and claims history to evaluate risk.

This selective approach allows XYZ Insurance Agency to streamline their processes and cater to their target market effectively.

Case Study 3: DEF Auto Insurance Co-op

DEF Auto Insurance Co-op is a unique insurance provider that operates as a cooperative, where policyholders are also members of the company. In this case, DEF Auto Insurance Co-op relies heavily on the trust and transparency within its cooperative structure. They prioritize gathering information from their members, including driving records and claims history, through self-reporting mechanisms.

While they don’t perform traditional background checks, the cooperative nature of DEF Auto Insurance Co-op ensures a collective responsibility for accurate information.

Case Study 4: PQR Direct Insurance

PQR Direct Insurance is an online-only insurer providing fast and convenient coverage options through advanced algorithms and data analysis. Their application process is streamlined for instant quotes, utilizing available data sources to assess risk and calculate accurate premiums.

While not conducting extensive background checks, they leverage public records and driving history databases to ensure precise risk evaluation.

Auto Insurance Companies and Background Checks: The Bottom Line

After you know what might be working against you when you’re getting rate quotes, be sure to enter your information accurately as you’re soliciting quotes.

Your MVR, C.L.U.E. report, credit score, and criminal history all play a part in determining your auto insurance rates. For example, a bad driving record, multiple claims, a poor credit score, and criminal convictions can significantly increase your rates.

Your MVR influences your rates the most. However, most infractions drop off your record after a matter of years.

Even if your background isn’t perfect, it doesn’t matter as much over time. Therefore, your auto insurance rates should eventually decrease.

Do everything in your power to clean up your driving record, carefully consider claims, improve your credit score, and avoid criminal convictions to lower rates in the future. 

Also, shop around for auto insurance. Each company looks at your background differently. Compare multiple companies to find the best deal for you.

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