Insurer Groups Back FCRA Extension

By Steven Brostoff, Washington Editor

NU Online News Service, May 14, 2:25 p.m. EDT--Extension of the national standards contained in the Fair CreditReporting Act would benefit both consumers and the financialservices industry, insurance groups say.

FCRA is important for insurance companies in two ways: the useof credit information for underwriting and the sharing of customerinformation among affiliates.

"In its current form, the FCRA has achieved an appropriatebalance between the needs of business and the rights of consumers,"said Monte Ward, vice president of federal affairs for theIndianapolis-based National Association of Mutual InsuranceCompanies.

The national standards contained in FCRA, which preempt statelaws, are set to expire on Jan. 1, 2004.

Mr. Ward said that if Congress does not extend the standards,states will be able to enact differing and increased restrictionson the use of credit information.

The House Financial Services Committee held a hearing recentlyon FCRA extension.

Carl Parks, senior vice president of government relations forthe Des Plaines, Ill.-based National Association of IndependentInsurers, said the hearing made clear the vast impact the nationalcredit system has on overall economic well-being.

He praised the Financial Services Committee for making FCRA atop legislative priority.

Regarding underwriting, Mr. Ward said that credit reports "serveas the foundation for important underwriting tools that allowinsurers to qualify more, rather than less business for theirunderwriting programs."

Insurers use credit reports in many states to calculateinsurance scores in order to underwrite and rate risks, hesaid.

"NAMIC is working with the other insurance trade associations tomake sure that Congress continues to recognize insurance scoring asa valuable underwriting tool," Mr. Ward said.

Regarding information sharing, Allen Caskie, chief counsel withthe Washington-based American Council of Life Insurers, notes thatunder FCRA, states cannot bar financial institutions from sharingcertain types of credit information among affiliates.

ACLI is part of a coalition of financial services firms, calledthe Financial Services Coordinating Council, that lobbies Congresson financial services issues.

The American Insurance Association is also part of FSCC, as isthe American Bankers Association and the Securities IndustryAssociation. All are based in Washington.

Specifically, Mr. Caskie said, under FCRA, financialinstitutions can share what is called "experience andtransactional" information among affiliates withoutlimitations.

This type of information, he said, includes policy terms andpayment history.

Other types of information, such as health and income, can beshared only if the consumer is notified and given the opportunityto opt out, Mr. Caskie said.

He noted, however, that some states are considering legislationthat would place more restrictions on information sharing if FCRA'spreemptions expire.

For example, Mr. Caskie said, California is considering a lawthat would require notice and opportunity to opt out for thesharing of experience and transactional information.