Does an insurance claim affect your credit score?

Close up bullseye on a dart board

What is a credit score? A credit score is a number between 1 and 1000 that is calculated based on your credit history from when you first apply for credit. Your repayment history can be held on your record for up to 2 years, or 5 years if you have had unpaid debt that a lender has tried to recover.

What is a credit score?

A credit score is a number between 1 and 1000 that is calculated based on your credit history from when you first apply for credit. Your repayment history can be held on your record for up to 2 years, or 5 years if you have had unpaid debt that a lender has tried to recover.

It includes your payment transactions associated with car finance, mortgages, credit cards and hire purchase agreements. It can also include your electricity, gas and phone bills.

An insurance claim has no impact on a credit score

Your credit score has no bearing on your insurance either when you make a claim or when you apply for a new policy. Neither does making an insurance claim affect your credit score.

Rather, insurance companies will look at general factors like your overall financial and insurance history and risk considerations when reviewing your insurance application and calculating your premiums.

What criteria do insurance companies use to assess a policy application?

Insurance companies use the information you give them to assess your risk levels. They rely on you to be completely honest when you provide them with your personal or business information. For example, whether you have ever been declared bankrupt or if your business is able to meet its monthly debt repayments.

Similarly, they look at your insurance history details and what claims you have made in the past and whether you have had previous claims declined. They also consider what other insurance policies you currently hold.

An insurer will also take into account your personal history, for example whether you have ever been convicted of a criminal offence. If you are looking to insure your business assets they will take into consideration the location and age of your business premises, or your annual turnover and number of employees amongst other factors.

In 1999 the Insurance Claims Register (ICR) was established as an independently run database that holds details of all claims that have been lodged in New Zealand by participating insurance companies. In essence it exists to check for fraud when a client takes out a new policy or when making a claim.

What information is recorded in the Insurance Claims Register?

To enable insurers to check the accuracy of the data submitted with policy applications and claims, the New Zealand insurance industry records any previous misdemeanours or fraudulent behaviour in the Insurance Claims Register. This can include a wide range of activities that can impact whether an insurance provider will accept your application for insurance cover.

For example, if an individual or entity has lied during the claims process, not disclosed a criminal past or pre-existing health conditions, been convicted of drink-driving or other road offences, or not revealed to their insurance company that they have had previous claims declined or insurance cover refused.

What happens if the information you provide to your insurer is incorrect?

In the event that you don’t disclose all your historical and current personal or business information that your insurer has requested from you, or that you are not completely honest, your insurer has the right to decline any claims you make or cancel your insurance contract.

They can also void or cancel your policy ‘Ab initio’, which means that your policy is cancelled from when it was first initiated and all your premiums are refunded.

How can an insurance broker assist with your policy or claims application?

As insurance can be complicated for many people, an insurance broker can be invaluable in helping you make sure your policy application is watertight and that you fully understand what is being asked of you. They will also handle the claims process on your behalf should the unexpected happen.

Your broker will assist you with identifying your individual or business risks so that you are covered for all eventualities, including situations that you may not have considered.

As experts in their field, they will explain the Terms and Conditions of your policy so that you are aware of what you are covered for and what your disclosure obligations to your insurer are.

To find out how an insurance broker can help you with your insurance policy, contact your local broker today.