NU Online News Service, Dec.8, 1:09 p.m.EST

SAN FRANCISCO–The National Association of InsuranceCommissioners Property & Casualty Committee chairman said thepanel will begin exploring how to gather data on insurers' use ofcredit information to determine premiums.

The committee would like to collect information and develop areport on the controversial credit scoring issue by the thirdquarter of 2010, according to Illinois Insurance Director andCommittee Chair Michael McRaith.

During a committee meeting at the NAIC Winter National Meetingheld here, Mr. McRaith said he plans to schedule a publicconference call in January, during which regulators will discusshow to approach developing a set of questions designed to procureinformation from individual insurers on how they use consumers'credit information.

Connecticut Insurance Commissioner Thomas Sullivan, recalling aquestion he asked in March when the Property & CasualtyCommittee and Market Regulation and Consumer Affairs Committeefirst sought permission to hold a joint hearing on credit-basedinsurance scores, asked, "What would be our endgame [in furtherexamining the credit issue]? What are we trying to get at?"

Director McRaith responded that the purpose of the informationand report will be to discern the rhetoric from the facts in orderto provide accurate information to those who need it.

Credit scoring has been attacked by opponents as failing toaccount for major impacts such as large medical expenses andunfairly impacting low income and minority consumers. Insurersrespond that it is a proven underwriting technique that rewardspersons who are good risks.

Mr. McRaith said if there is going to be "significant change" inthe states on credit-based insurance scores, it will likely bethrough laws passed by state legislatures.

"My view is the service we should provide is information,"Director McRaith said. He added that regulators cannot attempt toresolve the social or policy questions surrounding the creditissue, "but we can inform those who have that responsibility withsome objective, factual data about the impact on consumers."

One area the committee wants to understand better is the rangeof impact of insurance scores on consumers. South CarolinaInsurance Director Scott Richardson said his department did a datacall in his state asking how insurers used credit information.Director Richardson said he was "stunned" at the impact credit hadon rates.

For homeowners insurance, Director Richardson said creditaccounted for savings in a range of 7.6 percent to 51 percent perpolicy for consumers that benefited from their insurance score anda surcharge of 1 percent to 86 percent for consumers who wereadversely affected.

For auto insurance, Director Richardson noted, consumersbenefited up to 36 percent per policy, and were adversely impactedby a range of 12 percent to 99 percent.

He stressed that he did not know how many people were in theextreme ranges, but indicated that is information regulators shouldseek to collect.

Commissioner Sullivan, while offering support for the collectionof data, wondered where it ends, and whether the committee willstart examining other areas beyond credit. "This could be endless,"he said.

In fact, Director Richardson pointed out that regulators maywant to get a handle on what factors insurers use to determinerates beyond credit. He said the technical aspects of underwritinghave gotten to a point "where we need to talk about what isfair."

And in September, Director McRaith indicated he would like totake a look at marital status as a rating factor.

For now, though, Director McRaith said the goal is to "identifyquestions that we want answers to, and not with the intent ofattacking or antagonizing an industry or any one company."

A second component, he said, would be to explore regulatingadvisory companies that develop credit-based insurance scores. Todo that, Directory McRaith said, the NAIC would have to develop amodel law for states that don't have the authority to regulatethese companies.

Dave Snyder, American Insurance Association vice president andassociate general counsel, said the issue of credit has beenreviewed and re-reviewed and has been shown to be compliant withthe law and beneficial to the market and a large majority ofconsumers.