Insurance-Scoring Bill Passed In Colorado Senate

By Michael Ha

NU Online News Service, April 6, 2 :10p.m. EST?An insurance trade association, which hassustained some recent setbacks on the issue of insurers' use ofcredit scores, is hailing the Colorado Senate's passage of ameasure allowing insurers to use the process. [@@]

The legislation, SB 216, which now goes to the Colorado Housefor approval, is based on a credit-based insurance scoring modelcreated by the National Conference of Insurance Legislators(NCOIL).

Property Casualty Insurers Association of America called thebill "a positive alternative" to banning the insurers' use ofcredit scoring.

Last month the Massachusetts Senate introduced bill SB 2093 thatwould ban the use of credit-based insurance scores, and in January,Missouri Governor Bob Holden said he wants a legislative ban oninsurers' use of credit scoring, after an insurance departmentstudy found that credit scoring hurts low-income and minoritypolicyholders.

Commenting on the Colorado Senate's insurance-scoringlegislation, Michael Harrold, assistant vice president at the DesPlaines, Ill.-based Property Casualty Insurers Association ofAmerica, said the bill provides lawmakers "a positive alternativeto banning insurers' use of credit information in personal-linesinsurance."

Mr. Harrold said the bill, which would preserve insurers'ability to use "this highly predictive information," containsseveral consumer protections.

Enacting the NCOIL model-based bill, he said, would benefit mostColorado consumers by keeping the discounts that policyholders withgood insurance scores have earned. Efforts to ban insurance scoringare counter-productive, he remarked, because they force consumerswho are less likely to file a claim to subsidize higher-riskconsumers.

PCI observed that if the bill passes muster with the ColoradoHouse lawmakers, Governor Bill Owens is expected to sign thelegislation. "Gov. Owens and his administration have expressedtheir opposition to a complete ban on insurance scoring andunderstand the negative impact it would have on the overallmarketplace," Mr. Harrold said.

Senate Bill 216 closely follows the NCOIL model. The legislationspecifies how credit information may be used, and it requiresinsurers to disclose if credit information will be used forunderwriting or rating.

Additionally, insurers would be required under the bill to filescoring models with the insurance commissioner, and the bill alsoprovides for the model to be treated as a trade secret.

Under the bill, an insurer that takes an adverse action based oncredit information must provide the consumer with reasons for thedecision. The bill also provides two consumer safeguards notincluded in the NCOIL model. Under SB 216, individuals areprotected from being adversely affected by identity theft or thenegative credit information of a former spouse.