Two More States Pass NCOIL Credit Model

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By Caroline McDonald

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NU Online News Service, April 17, 1:15 p.m.EDT?Nebraska and Oklahoma have recently passed measuresregulating insurers' credit-based risk ratings, joining a list ofstates that have passed such laws.

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The Nebraska and Oklahoma measures were based on a model createdby the National Conference of Insurance Legislators.

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Prior to legislative passage, governors in the two statesindicated they would sign the measures, according to the NationalAssociation of Independent Insurers in Des Plaines, Ill.

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NAII said it views the NCOIL model act as a "positive"compromise addressing the concerns of agents and insurers.

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Among its key provisions, the NCOIL model requires insurers tonotify applicants that credit information will be used inunderwriting and rating, and to notify customers of primary factorsthat result in adverse actions.

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Other language in the measure prohibits use of creditinformation as the sole basis for denying, canceling ornon-renewing policies or raising rates.

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Insurers must file their scoring models with the states'insurance departments, which are required to treat them asprivileged trade secret material.

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For more details of the NCOIL model, see Monday's print editionof National Underwriter.

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NAII said that, before it lobbied for an amendment, the billapproved in Nebraska, LB 487, had not contained the NCOIL languageproviding trade secret status for scoring models.

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"By maintaining the information as a trade secret, thedepartment can protect consumers as well as insurers' interests ina competitive market," said Ann Weber, counsel for NAII.

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Nebraska and Oklahoma join North Dakota, Kansas, Colorado,Wyoming and Virginia in passing legislation on credit-basedinsurance scores this year. Earlier this month, North Dakotaadopted the NCOIL model and legislation following much of the NCOILmodel passed in Kansas as well.

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The legislation passed in Virginia contains much more detailedrequirements than the NCOIL model, including language banning useof certain types of credit information to calculate a score, saidJoseph Annotti, NAII vice president.

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Some of the prohibitions listed in the Virginia bill are:

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? Use of medical industry coded information.

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? Use of more than one home mortgage industry inquiry madewithin a 30-day period.

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? Use of more than one automobile lending inquiry made within a30-day period.

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? Use of insurance credit scores based on income, gender,address, zip code, ethnic group, race, color, religion, maritalstatus or nationality of the consumer.

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? Use of total available line of credit, unless the insurerconsiders the total amount of outstanding debt in relation to thetotal available line of credit.

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So far this year, 38 states have considered legislation toregulate the use of credit-based insurance scores, according toNAII.

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The group said credit scoring bills introduced in Connecticut,Kentucky, Maryland, New Hampshire, New Mexico, Utah and WestVirginia have been unsuccessful, and in Arizona, Georgia, Illinois,Indiana, Montana and Nevada only one house of the legislature hasvoted approval.

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