NU Online News Service, Nov. 30, 2:47 p.m.EST

A bill to ban credit-based insurance scoring in underwritingprivate passenger automobile insurance was signed into law inMassachusetts.

Gov. Deval Patrick signed the bill making the practiceunlawful—the latest action in what has been a contentious issuebetween the insurance industry and consumer groups.

The state banned insurance-based scoring and other socioeconomicfactors several years ago as it looked to implement a “managedcompetition” auto-insurance market under former InsuranceCommissioner Nonnie Burnes, replacing the existing system at thetime where the state set rates.

The new law, however, makes it illegal to use credit scores inunderwriting auto insurance. Other bans, such as using education oroccupation, remain administrative regulations.

Frank Mancini, president and chief executive of theMassachusetts Association of Insurance Agents, says the lawsupports his group's longstanding opinion about the use of theunderwriting tool.

“It shouldn't be used,” he says. “Study after study has shownthat there can be so many mistakes in credit reports, and it'sincredibly difficult to fix them.”

The MAIA was campaigning to get a question on the ballot nextyear to ban credit scoring. With the signing of the law, theassociation has dropped the question.

Many within the insurance industry, including the AmericanInsurance Association and the Property Casualty InsurersAssociation of America, have supported the use of credit scoring asa valuable tool.

“AIA supports the use of underwriting and rating tools thatallow insurers to make informed decisions regarding risk,” saysWillem O. Rijksen, spokesman for the AIA. “The vast majority ofpolicyholders benefit from lower premiums as a result ofcredit-based insurance scoring. AIA opposed this legislationbecause it will prohibit the use of this beneficial tool and resultin a disadvantage for Massachusetts drivers.”