Insurers Voice Fed Credit Score Study Concerns

Insurers Voice Fed Credit Score Study Concerns

By Matt Brady

NU Online News Service, Aug. 25, 4:26 p.m. EDT?Gathering the necessary data for an accurate study of carriers' use of credit records to rate insurance customers will be difficult, Insurers' organizations have warned the federal agencies assigned to the project.[@@]

Three major insurance industry trade groups, in a letter to the Federal Trade Commission and Federal Reserve, said the research should be conducted in a cautious manner.

A group of regulators from seven states had been planning a similar study of the insurers' controversial use of credit scoring, but dropped the effort after insurers threatened the possibility of a lawsuit. Critics say the process can unfairly penalize insurance applicants who are minorities, poor or without credit history.

The FTC and the Federal Reserve Board were required to conduct the study under a provision of the Fair and Accurate Credit Transactions Act, which reauthorized the rules governing credit transactions and the use of credit data.

A provision calling for the study was designed to insure that credit scoring is not used against any minority groups, and the three trade groups offering comment, the American Insurance Association, the National Association of Mutual Insurance Companies and the Property Casualty Insurers Association of America, cautioned that the difficulty of obtaining such information highlights the need for a cautious approach.

Stephen Zielezienski, AIA vice president and associate general counsel said the group, "has been and will continue to work very closely with the FTC on developing the methodology that will be used and the standards to be applied" in the study.

"Ideally, the study would use correct demographic information for each individual policyholder in order to give maximum integrity to the results," he said. "However, since it is unlikely that many of the classes protected by the Equal Credit Opportunity Act will be able to be identified on an individual basis with aggregate data, the study risks being oversimplified and inaccurate."

In their letter, the groups offer an opinion on several areas of how data could be collected and used. Mr. Mr. Zielezienski said that his group was, "very appreciative that the FTC has reached out to AIA and others as they design this study, and we look forward to continuing our collaborative work with them."