NU Online News Service, July 9, 11:30 a.m.EDT

The industry's latest bout with the credit-based insurancescoring opposition ended with a victory in Michigan's highestcourt.

The state Supreme Court has overturned an earlier ruling fromthe state Appellate Court and the insurance industry "couldn't behappier," according to Neil Alldredge, senior vice president ofstate and policy affairs for the National Association of MutualInsurance Companies (NAMIC).

Consistently touting the method as one that allows insurers toproperly price a policy and save consumers money, tradeassociations released statements saying as much.

"An insurance score measures only risk-relevant variables suchas payment history and public records, which are highly predictiveindicators of potential future risk," said Ann Weber, vicepresident of state government relations for the Property CasualtyInsurers Association of America. "We believe it is unfair to deny amajority of consumers a lower insurance rate and force them tosubsidize those who represent a higher risk."

A majority of state Supreme Court Justices concluded the Officeof Financial and Insurance Services–since renamed the Office ofFinancial and Insurance Regulation (OFIR)–exceeded its authorityabout five years ago when it banned the use of the underwritingtool. The use of insurance scoring does not violate the state'sinsurance laws, the court ruled.

"The court ruled that the insurance commissioner's attempt toprevent the use of insurance scoring was invalid andunenforceable," said David Snyder, vice president and associategeneral counsel of the American Insurance Association. "Inaddition, the court ruled that insurance scoring accuratelypredicts risk and is not unfairly discriminatory."

The insurance office "failed to show that insurance scoringproduces rates that are 'unfairly discriminatory,'" said theruling.

Only four states have rules against the use of credit-basedinsurance scoring: California, Massachusetts, Hawaii and Maryland.A Federal Trade Commission study released several years agovalidated the use of credit scores as an underwriting tool.

NAMIC said attention will now be turned to HB 5297–Michiganlegislation to adopt a model law on credit scoring from theNational Conference of Insurance Legislators.