Claims News Service, June 28, 3:17 p.m. EDT — The National Association of Mutual Insurance Companies is confuting an article in the August 2006 issue of Consumer Reports that examines the relationship between credit scores and automobile insurance premiums. [Click here to read Claims' breaking news piece on the subject.]
“It's common knowledge that insurance companies have been using credit data for years as part of the underwriting and rating process,” said Neil Alldredge, senior director of state advocacy for NAMIC. “The Consumer Reports article rehashes false claims and specious arguments that were put to rest long ago after insurance scoring was subjected to rigorous analysis by university researchers and government agencies such as the Texas Department of Insurance.”
Alldredge cited two examples of what he says are false or misleading claims that appear throughout the article:
CR: “Few insurers routinely disclose scores or what role they play in setting premiums.”
NAMIC: Most state laws require insurers to disclose to consumers that credit will be used as a rating factor and to notify consumers if an adverse actions are taken because of their credit histories.
CR: “There are 'no standards' governing the use of credit-based insurance scores.”
NAMIC: Most states have established a lengthy set of rules pertaining to insurance scoring. For example, most states prohibit insurers from using credit information as the sole basis for denying, canceling, or not renewing coverage, or for determining renewal rates. Insurers may not take an adverse action solely because a consumer does not have a credit card or if a credit report or an insurance score is calculated more than 90 days from the date the policy is written or renewed. Insurers are required to recalculate the insurance score using an updated credit report no less than every 36 months following the last occasion on which the insurer obtained credit information on the insured. Insurers are prohibited from considering credit inquiries not initiated by the consumer; inquiries relating to insurance coverage; collection accounts with a medical industry code; multiple lender inquiries from the home mortgage industry within 30 days of one another; and multiple lender inquiries from the automobile lending industry within 30 days of one another.
More information is available by clicking here to read the complete release from NAMIC.
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