We recently received notice that our auto insurance will be coming up for renewal. Reading through the several pages of privacy notices and disclosures finally led me to the last page warnings about opening new credit card accounts. There are discussions about the importance of paying balances on time, which wasn’t a surprise. However, I thought many people might not be aware that the “insurance risk score” considers how many new accounts you’ve opened in the past twelve months and the past five years. According to the insurance company, “Research shows that consumers who open a large number of accounts experience more insurance loses.”

I was skeptical about the statement, thinking we have a long term relationship with our insurance agency and they undoubtedly understand our record of filing claims without checking how many new credit cards we’ve requested. I called our agent and was told that insurance companies do look closely at credit cards as a part of their assessment of “insurance risk score,” and opening new credit cards definitely can increase costs of both auto and home insurance. I was told that three new cards in three years would be considered a negative in calculating that score. I inquired whether cancelling seldom used cards would be a good idea and was told cancelling a card is equivalent to opening a card. This was making less sense to me all the time. Why would cancelling a card not be considered a positive if opening accounts is considered to be a negative?

I hope I can learn more. My cynical thought is that insurance companies are happy to have found a way to charge more. They are assisted by all the stores that offer discounts if you apply for their cards. The money saved by having those store cards might be more than offset by additional insurance costs.