NU Online News Service, March 29, 2:38 p.m.EDT

DENVER–A first step toward a model law to regulatesellers of credit scoring products used by insurers has been takenby the National Association of Insurance Commissioners.

An NAIC committee meeting here last week approved a request todevelop legislation to regulate insurance scoring vendors with theaim of establishing oversight and examination of entities thatprovide information used by insurers in both pricing andunderwriting.

The subject was voted on by the Property and Casualty Committeeat the NAIC's Spring National Meeting held here, but IllinoisInsurance Director Michael McRaith, who chairs the committee, notedthat development of a model law would require the approval of theExecutive Committee/Plenary.

Director McRaith explained that insurance scoring vendors saidduring a hearing the Property and Casualty Committee held last yearthat they did not believe they were subject to oversight byregulators, but that they would welcome that oversight.

"We are going to accept that invitation, and we look forward todeveloping a model law," Director McRaith said.

According to the model law request, "These vendors are notcurrently subject to regulation even though the information theyprovide to insurers is used to establish price, eligibility andcoverage limitations in ways similar to the development of advisoryloss costs by advisory organizations. The model law would provide aregulatory framework for licensing and oversight of insurancescoring vendors."

Dave Snyder, American Insurance Association (AIA) associate vicepresident and general counsel, told the committee that regulatorsshould discuss this matter with the vendors to determine whatinformation regulators feel they are not getting. He said there maybe ways to address the perceived problems through an informationexchange.

"Going all the way to licensing [the vendors] as an advisoryorganization is a pretty steep step," he said.

None of the vendors were present at the committee meeting tooffer their perspective to regulators.

But when that point was brought up, Director McRaith said thevendors were "pretty clear" at the 2009 hearing that they wouldwelcome oversight.

Director McRaith said working on the model law would go througha conventional process that would be open and transparent. "But weintend to move forward quickly and will try to have somethingcompleted this calendar year," he said.