NU Online News Service, Jan. 28, 10:14 a.m.EST

A predictive data company said U.S. auto insurers are inquiringabout alternative ways to rate auto insurance risks without creditrecord data.

VortexDNA, a New Zealand-based firm said the interest comes asthe Washington State legislature is considering a ban on use ofcredit-based insurance scores.

Insurance association representatives, however, said theirmember companies are not expressing overwhelming concern to theirassociations nationally about a possible end to credit scoring.

VortexDNA said U.S. auto insurance clients are "preparing for abig shake up in the way they price insurance policies." The companysaid several of its U.S. insurance clients have asked VortexDNA tomodel how effective its data would be if credit data was no longeravailable.

VortexDNA Chief Executive Officer Branton Kenton-Dau said, "Wework with 3 of the top 10 auto insurers in the U.S. Every insurerwe have spoken to relies heavily on credit data to make predictionsabout who will claim. If credit data is banned, this is going tohave very large consequences for the industry."

VortexDNA – which indicated that its proprietary predictive datais not based on credit scores, education or income, but rather onhuman intention factors – said those three top 10 insurers haveexpressed interest regarding alternate factors to creditscores.

But Kenton Brine, assistant vice president, Northwest region forthe Property Casualty Insurers Association of America (PCI) said heis not aware of PCI member companies fretting over a nationwide banon credit scoring. He said insurers are aware of concerns about thepractice, but are not concerned credit scoring "will be plowedunder."

He noted that around 16 states considered a ban last year, butno state passed one.

"I'm sure [insurers] are looking into other tools," Mr. Brinesaid, noting that companies are always looking to improve how theyclassify risks. "Are they doing it out of fear that [creditscoring] is going away?" he asked, answering that he does not seethat.

Neil Alldredge, senior vice president, state and policy affairsat the National Association of Mutual Insurance Companies (NAMIC)said, "We don't have a clamoring…from member companies that believethere's a tide that has turned [with respect to creditscoring]."

He did note that there "certainly are companies that haveconcerns about individual states that are considering a ban," butthere's no mood that a ban is a foregone conclusion.

In the State of Washington, Insurance Commissioner Mike Kreidleris leading efforts to pass an outright ban of credit-basedinsurance scoring, association representatives said.

Bills have been introduced in both the House and Senate in theWashington legislature, and Steve Suchil, assistant vice presidentfor state affairs, Western region, for the American InsuranceAssociation (AIA), said action will be taken in both houses. TheHouse had the bill up for a committee vote today, while the Senatescheduled a hearing to discuss the merits of the bill.

AIA and other trades are due to testify at the hearing, Mr.Suchil said. He added it is too early to tell whether the bill willpass.

Mr. Alldredge said the makeup of Washington legislature – whichis heavily Democratic – will present a challenge for insurers."It's going to be a difficult battle," he said.

But Mr. Brine – also citing the Democratic-dominatedlegislature, and calling it a "fairly liberal" one – said he isproud of the legislature for spending a lot of time debating theissue.

"I think the bill is going to have real trouble [passing]," hesaid, noting that it "may be on life support in House."

The bill in the Senate will be more difficult for insurers todefeat, he said.

VortexDNA said regulators have been fielding complaints aboutcredit scoring, and pointed to a statement by Mr. Kreidler, whosaid he has received thousands of complaints.

Mr. Alldredge said credit scoring complaints make up just "ahandful" of insurance complaints.

Mr. Brine said the State of Washington receives more complaintsthan most states because of a reporting requirement. In Washington,he said, insurers have to send an adverse notice to insureds ifthey do not receive the "very best rate" because of credit. He saidinsureds may get a discount, but not the very best rate, and theywill receive an adverse notice.

In other states, he said, consumers receive an adverse noticeonly if their rates are worse because of credit than if credit hadnot been used as a factor at all.