First Credit Score Law Passed In 2002

By E.E. Mazier

NU Online News Service, March 5, 4:28 p.m.EST?Washington is set to become the first state this yearto pass legislation restricting the use of credit-based insurancescoring.

The state Senate last night passed House Bill 2544, which wasthen forwarded to Gov. Gary Locke. He is expected to sign the billinto law. An industry trade group reacted by predicting that higherpremium rates might result.

H.B. 2544 does not ban the use the consumer credit informationor scores by insurers.

Instead, it requires that an insurer that takes "adverse action"against a consumer based in whole or in part on credit history oran insurance score provide written notice to the consumer. Thenotice must indicate the "significant factors" of the credithistory or insurance score that led to the adverse action.

Further, the bill sets out different components of a person'scredit history that insurers may not use in making underwriting andrating decisions.

These include the absence of credit history or the inability todetermine the consumer's credit history, the number of creditinquiries made within a period of time, and the consumer's use of aparticular type of credit, charge or debit card.

Additionally, the bill provides that credit history cannot beused to determine personal insurance rates, premiums, oreligibility for coverage "unless the insurance scoring models" arefiled with the insurance regulator.

The National Association of Independent Insurers, based in DesPlaines, Ill. said it felt the measure that was passed "is animprovement over a previous version, which included rate caps."

But the NAII said the bill, once signed into law, could have"the unintended impact of making insurance less available anddilute the effectiveness of using insurance scores to determinerisks."

This in turn would reduce competition and deny manypolicyholders "the discounts they deserve," the NAII stated.

The NAII indicated that Utah is its next "battleground."

With the Utah session scheduled to adjourn today, trade groupsand insurance companies continue efforts to defeat House Bill 110,which allows insurers to use insurance scoring only for autoinsurance discounts.

The bill was approved in the Senate Transportation and PublicSafety Committee last week and is eligible for a vote on the Senatefloor.

The NAII also reported that Idaho and Maryland joinedCalifornia, Indiana and Utah last week as the only states withlegislation to pass one chamber. At the same time, bills in Alaska,Georgia and Minnesota were approved in committee.