Trade Groups Cheer Latest Credit Bills

In Georgia the State Senate gave unanimous approval yesterday for that state's bill permitting insurers to use credit-based insurance scores in underwriting and rating homeowners and auto insurance coverage. The bill now goes to Gov. Sonny Perdue for his signature.

Kansas yesterday enacted a law that will continue to allow insurers to use consumer credit histories in underwriting and rating policies.

"Yesterday's passage of H.B. 215 (in Georgia) is a victory for consumers and insurers alike," said Raymond G. Farmer, American Insurance Association assistant vice president, southeast region.

"Consumers benefit," Mr. Farmer said, "because insurers are able to more accurately underwrite and price their policies, allowing them to give better rates to customers who are less likely to have losses."

He said H.B. 215, which passed the Senate 47-0, reflects the consensus view of Georgia agents and carriers regarding the use of insurance scores.

The legislation is based on the model bill, which was approved by NCOIL in November 2002. Assuming the legislation is signed by Gov. Perdue, its effective date will be July 1.

The Alliance of American Insurers said it is pleased with the enactment of the law in Kansas that will continue to allow insurers to use consumer credit histories in underwriting and rating policies.

The law requires insurers to tell the Kansas Insurance Department how they use consumers' personal credit histories to determine insurance rates or to cancel policies. Many insurers now use credit histories to decide whether to issue consumers insurance and what to charge.

"This law is a fair compromise for both consumers and insurers," said Lynn Knauf, a policy manager in the property and casualty department of the Alliance.

Ms. Knauf said the Alliance is "pleased that insurers will still be able to use credit scoring?an accurate and non-discriminatory underwriting and rating tool?since it is clearly in the best interests of everyone to allow insurers to accurately evaluate and price their business."

Formerly HB 2071, the new law is substantially based on the NCOIL model, but includes a requirement that the insurance commissioner complete a study on the effects of credit scoring in insurance. The law becomes effective Jan. 1, 2004.

This legislation, the Alliance said, is much better than a previous attempt to regulate credit scoring. "The industry dodged a bullet when an earlier credit scoring bill, SB 144, was defeated on the House floor following intense lobbying by Alliance counsel," Ms. Knauf said.

That bill, she noted, would have required the commissioner to complete a much more costly study on the impact of credit scoring on protected classes at the expense of insurers.

"For the first time Georgia will have standards in place for insurers to follow when using credit-based insurance scores in the underwriting and rating of personal lines policies," said Farmer. "Also, the operational uniformity provided by the NCOIL model is a plus for insurers seeking to comply with new credit-related laws and regulations across the country."