The Texas study looked at a random sample of 175,647 people in the state and found that "the lower a named insured's credit score, the higher the probability that the insured will incur losses on an automobile insurance policy, and the higher the expected loss on the policy." The study's authors noted that they did not attempt to explain why credit scoring added significantly to the insurer's ability to predict insurance losses.
The FTC study found that credit-based insurance scores are effective predictors of risk under automobile policies. "They are predictive of the number of claims consumers file and the total cost of those claims," study authors write. "The use of scores is therefore likely to make the price of insurance better match the risk of loss posed by the consumer. Thus, on average, higher-risk consumers will pay higher premiums and lower-risk consumers will pay lower premiums."
It's also important to note that insurance companies don't use traditional credit scores. They build their own scores based on FICO or Experian scores: Basically, companies take your score and use it in their own model.