The National Conference of Insurance Legislators has added a drafting note to their credit scoring model law allowing insurers to allow for customers' “extraordinary life circumstances” when using credit records to underwrite and rate personal lines policies.

State lawmakers approved the addition to the model law at the group's annual spring meeting last week in Fort Lauderdale, Fla.

NCOIL claims that more than half of the states have adopted either the NCOIL model or a provision very similar to it to quell some of the controversy that has resulted from the widespread use of credit scores by personal lines carriers in underwriting and rating policies.

By adding the co-called “extraordinary life circumstance” drafting note, the lawmakers hoped to respond to critics who felt that policyholders should not be penalized when they either lose job or suffer the effects of a natural catastrophe.

Neal Alldredge, senior state advocacy director for the National Association of Mutual Insurance Companies, said that in those states that have adopted the provision there have been no problems or abuse of the privilege reported.

The lawmakers decided to leave it up to the states to enumerate what circumstances should be considered extraordinary enough to merit a closer look by insurers of credit scores when rating policies.

While the proposal by consumer advocate Birny Birnbaum to exempt residents from disaster area counties from credit scoring provisions gained no traction in the states, Mr. Alldredge said that natural catastrophe damage would be a logical extraordinary life event.

A total of seven states–Colorado, Florida, Louisiana, Montana, New Mexico, Texas and Virginia–have incorporated extraordinary life circumstances provisions into their models, according to NCOIL.

Special Reports /

NCOIL Puts Extraordinary Event In Credit Model

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