WASHINGTON–The Federal Trade Commission plans to require the nine largest property-casualty insurance companies to provide data to the agency on the impact of credit scores on their personal lines insurance rates.

The agency said the data will be used to prepare another study on whether the use of credit scores in determining rates is discriminatory to minorities.

FTC spokesman Frank Dorman would not say which nine companies the commission will seek to obtain data from, and that the timing of the process would depend on the comments received. “It could be months,” he said.

In response, Marliss McManus, senior federal affairs director at the National Association of Mutual Insurance Companies, said this afternoon, “We're continuing to work with the FTC to give them what they need to conduct the study.”

She added, “We hope to develop a compromise whereby the FTC gets the necessary information from insurers without having to use the compulsory process.”

The agency on May 16 approved a resolution requiring participation by insurers in the agency's study of the fairness of using credit scores in determining rates. The requests for the data will be made following a short comment period, the agency said.

Disclosure of the agency's plans is expected to be made at a hearing tomorrow on the controversial issue before the Oversight and Investigations Subcommittee of the House Financial Services Committee.

Representatives of the National Association of Insurance Commissioners and the Property Casualty Insurers Association of America will be among those testifying at the hearing.

The FTC is demanding the data in an effort to avoid the congressional criticism it received for seeking the data on a voluntary basis, its past policy.

A similar study into the use of credit-based scoring in the auto insurance market was released last summer and drew criticism from members of the House Financial Services Committee for only using information provided voluntarily by insurers.

The report found credit scores to be an accurate predictor of loss risk for auto insurance but also potentially discriminatory.

Rep. Mel Watt, D-N.C., the chairman of the Financial Services Subcommittee on Oversight and Investigations, along with full Financial Services Committee Chairman Barney Frank, D-Mass., and Rep. Luis Gutierrez, D-Ill., requested at that time that the FTC use its authority to compel insurers to provide data as the commission conducts its next study examining the use of credit scores in homeowners insurance.

An FTC official told Rep. Watt's subcommittee in a hearing last October that it would comply.

“The October subcommittee hearing on the use of credit-based insurance scoring reinforced my concerns about this practice,” Rep. Watt said in scheduling the latest hearing.

“I have scheduled a second hearing to obtain more information for the members of the full Financial Services Committee to use in evaluating the impact of credit-based insurance scoring and possible alternatives that would result in fairer and less discriminatory results.”

Among those scheduled to testify at the hearing are Florida Insurance Commissioner Kevin McCarty; Lydia Parnes, director of the Bureau of Consumer Protection for the FTC; Consumer Federation of America Director of Insurance J. Robert Hunter; and Charles Neeson, a senior executive for personal lines products with the Westfield Group on behalf of Property Casualty Insurers Association of America.

This article updated May 21, 9:06 a.m.

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FTC To Require Data For Homeowners Credit Study

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