A car insurance policy offers financial coverage to the policyholder in times of emergency, such as accidents and vehicle breakdowns. However, just like your car, the car insurance policy provider needs security as well.
When you buy online car insurance, the insurance company analyses multiple factors of your identity. An entire streamlined process comes into play in such cases. This process is called a background check, and it safeguards your insurer from any fraudulent claims.
Providers carry out background checks on every policy seeker to safeguard themselves from fraudulent people.
Importance of Car Insurance Background Checks
One of the most important factors that determine your eligibility to get car insurance and your premium amount is the background checks your insurer conducted on you. The background check process ensures that the insurer is not dabbling in high-risk clients.
Suppose someone buys comprehensive or own-damage car insurance for their vehicle from Tata AIG. The company has to confirm their identity, financial status, socio-political status and more. Here is how this process helps:
● Prevents Fraud
An insurance company’s financial health and stability depend on the kind of policyholders they provide policies. It is a system that offers funds when one is having difficulty. However, a few people take advantage of these companies. Insurance companies need security from these people.
Car insurance record checks or background checks help the company establish a sustainable system that offers valuable insights into the policy seeker’s life that would affect the company in any way.
● Determine Premium
Background checks determine the car insurance policy premium as well. One of the many purposes of a car insurance background check is to determine the risk associated with insuring a certain policy seeker. A few factors of the car insurance record checks can clearly state whether or not the person is trustworthy. If they stand the test of background checks, they are allotted low-premium car insurance. If not, they are stuck with a hefty amount.
Different Aspects of Car Insurance Background Checks
● Personal Details
Policyholder’s personal details are utilised to verify their identity. These personal details include full name, government identification documents, residential address proof, contact information and date of birth proof.
When the policy providers receive this information, they compare, verify, authenticate and then authorise you as an eligible policyholder. Ensuring that this information is accurate and error-free helps the company confirm the applicant’s identity and prevent fraudulent profiles and theft attempts.
● Credit Scores
Insurance is a financial instrument. Hence, the insurance company needs a financial parameter to verify the risk associated with an applicant. Many companies use credit scores as an aspect of their car insurance background check process.
A person’s credit score is an excellent indicator of their financial health and behaviour, as well as their ability to exhibit responsibility or lack thereof. If the person seems responsible, they are eligible for a lower-premium; if not, they are a risk that shows a high likelihood of claims.
● Driving History
A person’s driving history indicates their driving habits, adherence to traffic laws, capability to carry the road responsibility and many more things. Driving history is a detailed record of any challans, claims or traffic violations on the vehicle and the owner-driver of the car.
If the person has a good driving history record, they receive low-premium car insurance. However, if that is not the case, they are stuck with a large amount of premium on their policy.
● Criminal History
A criminal record is mostly not directly related to the car insurance background check. However, these records can still impact the car insurance policy premium for the worse.
There are certain offences attached to driving habits, such as drinking and driving, driving under the influence of drugs, hit and run and many more. Insurers view this criminal record as an indicator of a high probability of claims from this applicant.
● Vehicle Details
The vehicle’s details, including registration number, chassis number, claim history and details, make and model, market price and age, play an essential role in an insurance background check.
Newer and more expensive models of cars are safer and result in lower premiums. At the same time, luxury cars with high safety features will lead to higher premiums due to the higher sum assured.
Conclusive Thoughts
Insurance background checks make for a crucial component in the process of purchasing a car insurance policy. When you understand the different aspects of background checks, you can act accordingly to reduce car insurance premium amount allotment.
Mainly because maintaining a good Car insurance record check results in low-premium car insurance in your pocket!
