Calif. May Ban Credit Scoring In Homeowners
NU Online News Service, July 1, 10:55 a.m. EDT, New York?A national trade group for insurers said, despite its opposition, that a California bill to ban the industry's use of credit scoring to set homeowner rates has a fair chance of passage.
The measure, SB 691, which goes to the State Assembly next week, was approved by the State Senate last May and is likely to be signed by Democratic Gov. Gray Davis if it passes both houses, said Peter Gorman, Alliance of American Insurers vice president.
"I think the chance of S.B. 691 becoming law is fairly good. We hope it doesn't pass, but there is a strong support from some Democrats to pass it. I give it a 50-50 chance," Mr. Gorman told National Underwriter.
Mr. Gorman's Downers Grove, Ill.-based Alliance with the American Insurance Association in Washington, D.C.; the National Association of Independent Insurers in Des Plaines, Ill.; and the Indianapolis, Ind.-based National Association of Mutual Insurance Companies released a report at the National Association of Insurance Commissioners' summer meeting that found credit scoring is an accurate predictor of risk.
Opposing the insurers view are consumer advocacy groups, such as Consumers Union, the nonprofit publisher of Consumers Reports; it argues that credit scoring shouldn't be part of customer risk assessment at all.
"We do not believe that a consumer's credit history has anything to do with how likely they are to file a claim under their homeowners policy and therefore should have nothing to do with the premiums they pay or whether they're offered coverage at all," said Norma Garcia, senior attorney with Consumer Union's West Coast regional office.
"We urge lawmakers to support S.B. 691, which bans this unfair practice," Ms. Garcia said.
Mr. Gorman from the Alliance noted that there seems to be "a lot of controversy" that the California Department of Insurance claims it has been receiving from the public regarding credit scoring. "And Commissioner John Garamendi is pushing very aggressively to get this bill passed," he said.
Beginning next Wednesday, California's Assembly Insurance Committee will hear testimony from both sides of the argument. "The author of the legislation, Sen. Martha Escutia, D-Montebello, will present the bill to the committee and then the committee will hear from the bill's supporters," Mr. Gorman said.
The committee will also hear from the opponents of the bill, including the Alliance of American Insurers.
"The Assembly would probably vote on it sometime during August, and we don't expect a veto from the governor since he is also a Democrat," he noted. "Democrats have a near-super-majority in both houses in California."
If the bill is signed into law, it would become effective in California beginning 2004.
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