WASHINGTON–One of the five Federal Trade Commission members hasfiled a dissent from the agency's study of insurance industrycredit scoring use, which concluded it is an “effective predictor”of risk for rating auto insurance customers.

Commissioner Pamela Jones Harbour disagreed with the methodologyused in generating the report and voiced doubt over the“reliability of any conclusions the report might draw.”

Another member of the Commission had other concerns, saying thatwhile he thought the report “makes a substantial contribution topublic discussions in this area,” the results “are, of course, nocause for celebration.”

The dissent, and the concurring statement of Commissioner JonLeibowitz, prompted Commission Chairman Deborah Platt Majoras, andthe two other supporting commissioners, to issue a statementdefending the report.

“While we respect the dissent's views as to the data andmethodology used here, we have confidence in the quality of theprocess that the Commission staff used and the soundness of theresults obtained,” the report's three supporters said.

The apparent lack of unanimity amongst the commissioners islikely to enliven a hearing on the issue scheduled for tomorrow bythe Oversight and Investigations Subcommittee of the HouseFinancial Services Committee.

Witnesses expected at the hearing include: Robert Hartwig,president of the Insurance Information Institute; Florida InsuranceCommissioner Kevin McCarty; Eric Rodriguez, Policy Analysis Centerdirector for La Raza Hispanic advocacy organization and BirnyBirnbaum for The Center for Economic Justice consumer group.

A consortium of consumer groups has already asked Congress toreject the study and order the agency to conduct “an objective,independent study.”

“The relationship between insurance credit scores and race is sostrong that even though the FTC used data handpicked by theindustry, it found that credit scoring discriminates againstlow-income and minority consumers and that insurance scoring was aproxy for race,” they said, calling for a ban on credit scoringuse.

The report said African-Americans and Hispanics aresubstantially overrepresented among consumers with the lowestscores–the scores associated with the highest predicted risk–”andsubstantially underrepresented among those with the highestscores.”

In her dissent, Ms. Harbour charged that the “data collectionand analysis fell short of the FTC's gold standard for rigor andcompleteness, and did not reflect the agency's best practices.” Sheadded that “better alternatives were available and should have beenutilized.”

Ms. Harbour argued, “Had this report been based on the realinsurance marketplace–using actual, verifiable data on individualpolicyholders, from a broad cross-section of insurancecompanies–reliable answers might have emerged.”

She said she couldn't endorse the report “due to my gravemethodological concerns. This study fell short of the rigorousresearch and data-collection standards to which the Commissionusually adheres.”

The report, released Monday by the commission, says creditscores are an “effective predictor” of risk under automobileinsurance policies.

It adds that the use of credit-based insurance scores “mayresult in benefits for consumers.” For example, the report saysscores permit insurance companies to evaluate risk with greateraccuracy, “which may make them more willing to offer insurance tohigher-risk consumers for whom they would otherwise not be able todetermine an appropriate premium.”

Insurance groups that have fought battles in legislatures acrossthe country to preserve their right to use credit scoring havehailed the report as validation of a necessary industryprocess.