NAII Finding Flaw In NAIC Credit Scoring Brochure

During a conference call, the Working Group adopted a list of options for states to consider when reviewing insurance credit scoring proposals, along with language for a consumer brochure for distribution to state insurance departments.

NAIC spokesperson Michele Compton said the actions of the Working Group will be considered by the NAIC Market Regulation and Consumer Affairs Committee at the organization's March meeting in Atlanta and go before the full membership In June.

She said there could still be modifications, but it is unlikely.

NAII said the Working Group made only minor modifications to the options list and the consumer brochure. The materials had been redrafted after the NAIC Winter Meeting in San Diego this past December.

NAII, which participated in the conference call, said it had cited its concerns about the question, one of 17, which asked, "Does using credit information penalize minorities or low-income consumers?"

In answer the brochure language reads, "We do not know. Statistical studies have not conclusively determined whether insurance credit scoring disproportionately affect minorities or the poor. Insurance regulators nationwide are currently examining this issue.

"Consumer groups worry that insurance credit scores will be lower for low income and minority groups. Consumer groups also point to the fact that most insurers and insurance credit scoring model vendors will not make their insurance scoring models public so consumers can see how they use credit data to calculate a score."

Referring to the question and the answer in the brochure, NAII Vice President Samuel Sorich said it "seemed out of place to talk about one of the controversies."

The NAII said it had objected to the inclusion of the question because "there is no solid evidence to suggest that the use of credit scoring has a disproportionate affect on economically disadvantaged individuals or minorities."

The Working Group rejected the objection and kept the question in the brochure.

"The final product of the Credit Scoring Working Group was as expected" said Mr. Samuel Sorich. "At this juncture, NAII is grateful that we were allowed the opportunity to provide input and we look forward to participating with this Working Group as it addresses other issues during the coming year."

Mr. Sorich added that the Working Group announced during the conference call that the final version of the brochure and options paper would be made available to state insurance departments in the next several weeks.

NAII, located in suburban Chicago, counts 715 property-casualty insurers as members. NAII said those companies write more than $98 billion in annual premium, more than 31 percent of the nation's p-c insurance.