Regulator: Kan. Scoring Bill Informs Consumers

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Michael Ha

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NU Online News Service, April 14, 10:15 a.m.EDT?The new insurance scoring bill, approved by the Kansaslegislature last week, will go a long way in helping consumersunderstand the use of credit scoring, a Kansas insurance departmentofficial said.

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"We think the critical part of this bill is that if consumersare dissatisfied with their rate, vis-?-vis the credit score, theyhave the right to an internal appeal with the insurance company,"said Jerry Wells, insurance department director of governmentalaffairs.

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The department was instrumental in developing many of theprovisions in the measure which was approved (HB 2071) and isscheduled for signing shortly by Gov. Kathleen Sebelius, hesaid.

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The bill, which will go into effect beginning next year, isexpected to provide improved communications between agents andtheir consumers.

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"Part of the problem in Kansas has been that the agents didn'thave either the training or information to explain the use ofcredit or insurance scoring to consumers. So it created acommunications gap," said Mr. Wells. "And we believe that this billwill alleviate that gap, and consumers will be much better informedabout the use of credit scoring."

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But Mr. Wells added he doesn't believe the new regulation willdecrease the use of credit scoring by insurers.

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"Our attitude is that there was a legislative taskforce that wasorganized in 2002, and their conclusion was that although creditscoring should not be totally banned, it should be controlled andregulated," he said.

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For example, his department has mandated in the bill thatinsurers cannot use credit scoring exclusively in establishingrates. The formulas, the so-called "black box" that insurancecompanies use to determine insurance scores, has to be filed withthe insurance department so that regulators can determine whetherthose scores discriminate in any unlawful way.

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Insurers must also notify their insureds when credit scoring isused in setting their insurance rates.

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Mr. Wells explained that the bill won't go into effect untilnext year so that insurance companies can prepare their internalsystems for the new law.

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"It will have an immediate effect next year because theincreased regulation will have an impact on how the industry usescredit scoring. The insurance department would have more authoritywith this bill. We feel it's a very consumer-friendly bill," hesaid.

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