Two More States Pass NCOIL Credit Model

Two More States Pass NCOIL Credit Model

By Caroline McDonald

The Nebraska and Oklahoma legislatures adopted the National Conference of Insurance Legislators model act for credit-based insurance scoring last week, adding their names to a growing list of states that have adopted legislation to regulate the use of credit scores this year.

The National Association of Independent Insurers in Des Plaines, Ill., which views the model as a “positive” compromise addressing the concerns of agents and insurers, said that signatures from the governors of the two states are expected “imminently.”

Among its key provisions, the NCOIL model requires insurers to notify applicants that credit information will be used in underwriting and rating. In addition, credit information cannot be used as the sole basis for denying, canceling or non-renewing policies or hiking rates.

Insurers must also file scoring models with insurance departments, which will, in turn, protect the models as trade secrets. (For more details of the NCOIL model, see a related article on page 17. That article and an accompanying chart were prepared before Nebraska and Oklahoma adopted the model.)

Nebraska and Oklahoma join North Dakota, Kansas, Colorado, Wyoming and Virginia in passing legislation on credit-based insurance scores this year. Earlier this month, North Dakota adopted the NCOIL model and legislation following much of the NCOIL model passed in Kansas as well.

Legislation passed in Virginia in March contains much more detailed requirements than the NCOIL model, such as the types of credit information that cannot be used to calculate a score, said Joseph Annotti, NAII vice president.

Some of the prohibitions listed in the Virginia bill are: use of medical industry coded information; use of more than one home mortgage inquiry in a 30-day period; use of more than one automobile lending inquiry within 30 days; use of insurance credit scores based on income, gender, address, zip code, ethnic group, race, color, religion, marital status or nationality of the consumer; use of total available line of credit, unless the insurer considers the total amount of outstanding debt in relation to the total available line of credit.

This year, 38 states have considered legislation to regulate the use of credit-based insurance scores, according to NAII, which said that bills have died in seven statesConnecticut, Kentucky, Maryland, New Hampshire, New Mexico, Utah and West Virginia.

Reproduced from National Underwriter Edition, April 21, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.