Credit Scoring Bill Loses In California

The credit scoring measure, which had the strong support of Insurance Commissioner John Garamendi, needed 10 votes to move from committee, but received only seven. Six members voted against the bill, SB 691, sponsored by Sen. Martha Escutia, D-Norwalk.

Before the vote, insurers had attacked the measure calling it destructive for the state's economy.

The National Association of Independent Insurers, based in Des Plaines, Ill., said insurance availability would be restricted and cited a California Chamber of Commerce study that said a 10 percent reduction in homeowner policy availability would lead to a $6.1 billion decline in the state's annual gross product and a loss of 10,000 jobs.

Insurers also cited studies showing a connection between a consumer's credit rating and the likelihood of claims.

Mr. Garamendi had urged the measure as a needed protection for consumers and it had the support of Consumers Union. The commissioner said credit scoring posed "a great risk to poor and minority communities. This is redlining, and our duty as elected officials is to protect constituents from its damaging effects. We must not allow insurers to use arbitrary data to exclude entire classes of people from the ability to obtain reasonable coverage. Insurers have yet to prove to my satisfaction that credit scoring is a predictor of future claims activity."

Today, in a statement calling the committee vote a "huge victory for the state's homeowners," the Downers Grove, Ill.-based Alliance of American Insurers' policy manager Lynn Knauf said credit information has proven to be "a powerful, statistically valid, non-discriminatory tool for predicting loss."

She added that, "Insurance scores do not discriminate against lower income individuals. People of all economic levels have good and bad credit records. Income is not a factor considered in an insurance score."

Sam Sorich, president of the Association of California Insurance Companies, who testified at the hearing that preceded the vote, said, "We are pleased that members of the Assembly Insurance Committee recognized that SB 691 is the wrong response to current market conditions in California. Insurance scores help most consumers get better rates because most people have good credit. Without the ability to use credit-based insurance scores, most policyholders would pay more for insurance."

The other bill which failed was sponsored by Sen. Jackie Speier, D-San Mateo. Her measure, SB 64, would have required insurers to seek prior approval of underwriting criteria and set limits on insurers' ability to nonrenew homeowners policies. It received only three of the 10 votes needed to release it from committee.