Insurers Introduce Credit-Scoring System to Vet Applicants for Instalment Plans

Strategic Insights -

Premiums for car and household insurance can be a significant burden for many people, prompting them to opt for instalment payment plans to spread the cost. However, insurers have expressed concerns that fraudsters and individuals who default on payments are taking advantage of these schemes. To combat this, insurers have introduced a new credit-scoring system, which will vet applicants for instalment plans through UAPT-Infolink, a credit-scoring agency. This system, initially using data from 12 insurers, aims to prevent individuals who are likely to default on payments from signing up for instalment plans.

Key Takeaways:

  • Insurers will vet applicants for instalment plans using a credit-scoring system provided by UAPT-Infolink, which will initially draw on data from 12 insurers, including General Accident, Cornhill, Norwich Union, ITT London & Edinburgh, and Legal & General.
  • The system will record defaults only after a policyholder has failed to respond to several letters, and will not count cancelled payments or instances where a policyholder has stopped paying due to circumstances such as selling a car.
  • Customers who cancel direct debits without telling the insurer and do not respond to reminders risk being deemed to have defaulted.
  • Insurers will also have access to other credit-scoring information, including county court debt judgments dating back six years and whether the individual appears on the electoral register.
  • Individuals can apply to see their credit record by sending £1 to the Consumer Relations Department, Infolink Limited, and must provide their surname, full first name, title, and all addresses for the past six years.
  • Policyholders who cancel instalment payment plans without explanation may be registered as defaulters, making it difficult for them to pay by instalment in future.
  • Insurers estimate that fraudsters and individuals who default on payments are costing the companies millions of pounds annually.
  • The new system has been disclosed by several insurers, including General Accident, Cornhill, and Norwich Union, which must alert policyholders to the possibility of their data being used in credit-scoring on proposal forms.

Statistics:

  • Millions of pounds annually are estimated to be lost by insurers due to fraudsters and individuals who default on payments.
  • 12 insurers are initially involved in the credit-scoring system, including General Accident, Cornhill, Norwich Union, ITT London & Edinburgh, and Legal & General.
  • Consumers can apply to see their credit record for £1, including details of defaults and county court debt judgments dating back six years.
  • Individuals who fail to respond to several letters risk being deemed to have defaulted under the new system.

Sources:

  • The Observer
  • UAPT-Infolink
  • General Accident
  • Cornhill
  • Norwich Union
  • ITT London & Edinburgh
  • Legal & General