Insurance Credit Scoring Examined In Miss., Ohio

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By Michael Ha

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NU Online News Service, Aug. 8, 2:50 p.m.EDT?Regulators in Mississippi and Ohio are taking a closerlook at insurers' use of credit scoring in their states.

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This week, Mississippi's insurance department proposed aregulation to address the use of credit scoring in insurance ratingand underwriting, with a hearing for the proposal planned for Sept.9 in Jackson, Miss.

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James Taylor, southeastern regional manager for the Des Plaines,Ill.-based National Association of Independent Insurers, observedthat the proposed regulation carries many aspects of the model lawdeveloped last year by the National Coalition of InsuranceLegislators.

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Mr. Taylor said in a statement that although the proposal isn'tperfect, "we believe in its current form the Mississippi regulationwill address the most important concerns associated with the use ofcredit scoring."

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One of the main provisions in the proposed regulation deals with"no-hits/thin files." The regulation would ban insurers fromdenying or non-renewing coverage solely based on incomplete credithistory or even the lack of credit history if the carrier receivedaccurate and complete information from the prospective client.

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In Ohio, the state's insurance department is continuing to keepa close watch on the use of credit scoring by insurers. Earlierthis month, insurance regulators in the state said they wouldconduct a review of insurance companies to find out how they areprogressing toward complying with a new regulation that went intoeffect this past June.

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The Ohio rule, which is also similar to the NCOIL model,prohibits insurers from using a consumer's credit score as the solecriterion for rating or underwriting personal auto and homeownersinsurance policies. The new regulation would also require carriersto disclose certain information to consumers, including anexplanation of credit report findings that can contribute to ahigher rate or rejection of coverage.

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The review, the insurance department stated, will begin thismonth by examining a sample of randomly selected carriers licensedto conduct business in Ohio.

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From this sample, the department will analyze carriers' policiesand procedures in using credit scores in the underwriting andrate-making process and see how these companies are preparing tocomply with the new regulation. The state regulators noted thatOhio insurers must be in full compliance by Sept. 12.

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