Texas Insurers' Secrecy Argument Called Bogus

Texas Insurers' Secrecy Argument Called Bogus

By Matt Brady

NU Online News Service, Sept. 20, 2:06 p.m. EDT?A consumer advocate, who has provoked a Texas legal battle over access to what insurers say is privileged information, said the carriers' argument for the case is "idiotic" and the law protects them from harmful revelations.[@@]

Birny Birnbaum, executive director for the Center for Economic Justice in Austin, Texas, rejected a claim by insurance trade groups that information from a Texas Department of Insurance credit scoring survey would improperly reveal individual policyholder data.

Individual policyholder data, he said, is already protected by exceptions to the state open records laws, and companies' could also make a legitimate trade secrets argument to prevent the release of policyholder data.

"It's idiotic," he said. "This is what's so frivolous about this. They're making it out to be something it's not.

Three property and casualty trade associations have sued the Texas Dept. of insurance and state Attorney General Greg Abbott to block a ruling by Mr. Abbott that would make public some of the data collected during a state mandated study into insurers' use of credit records to rate consumers as risks.

The Property Casualty Insurers Association of America, American Insurance Association and the National Association of Mutual Insurance Companies filed the suit in Travis County District Court.

In June, under the state's open records laws, Mr. Birnbaum requested copies of the department's letters to various insurance companies seeking data for the study.

The department provided the letters, but blacked out the names of the insurers they were sent to and did not provide attachments to the letters that listed the specific data being requested. Mr. Birnbaum sought to have those names released, and the department requested a legal ruling from Mr. Abbott.

According to Don Hanson, southwestern regional manager and counsel for the Property Casualty Insurers Association of America, the provision of the state insurance code requiring that the study into credit scoring be done provides for the confidentiality of the insurers involved.

However, in what Mr. Hanson called an "absurd decision," the attorney general ruled that while the names must be withheld from the report the department will issue, they can be released in response to Mr. Birnbaum's open records request.

Abbott's ruling, Mr. Hanson said, "was not crafted appropriately to the intent of the law."

Additionally, Mr. Hanson argued that following the logic of Mr. Abbott's ruling, other information that should be kept confidential, such as consumer policyholder information including race and social security numbers, could also be made public.

"Clearly that was not the intention of the legislature," Mr. Hanson said. Insurance companies have cooperated with state regulators. He noted the department is examining two million individual policies, and the insurers are seeking to ensure those records won't be made public.

"We're just trying to protect not only our companies' data, but also our consumers' policy data," he said.

Additionally, the trade groups' complaint says the department "did not notify any insurance companies whose information was subject to the request of the receipt of the request. As a result, the insurance companies were deprived of their right to submit comments about why their confidential and/or proprietary information should not be released."

Mr. Birnbaum, however, countered that the trade groups are making a "silly argument" by claiming that individual policyholder data could eventually be made public and they have legal protection against that happening.

The department's report to the legislature is due no later than Jan. 1, 2005. Because the suit does not pertain to the report, but rather the information gathered to compile it, Mr. Hanson said that it was unlikely the trade groups' lawsuit would delay its release, and that any delay was not the intent of the lawsuit.

In fact, Mr. Hanson said he expected the report would be released well before it was due, possibly as early as November.

A spokesman for the Texas Department of Insurance, Jim Hurley, acknowledged that "we're in a lawsuit," but said that the department had no comment otherwise and would wait for the issue to be resolved by a judge.

This is not the first time a request for insurance information in Texas by Mr. Birnbaum has provoked a legal tilt with insurers. In 1999 he was part of an action to obtain insurance department ZIP code data that could potentially reveal discriminatory sales patterns. Mr. Birnbaum eventually dropped the request in 2001, saying intensive legal opposition by State Farm had made the legal fight too expensive to continue.

The threat of legal action by insurers has been a part of prior investigations into the use of credit scoring. Industry groups had said this year they would file suit against state regulators taking part in an eight-state National Association of Insurance Commissioners' study on the issue.

The multistate study, and the threat of litigation, were called off after the industry agreed to provide data and support a joint investigation by state and federal regulators mandated by a provision added to legislation extending the Federal Fair Credit Reporting Act.

Critics of credit scoring have complained that it discriminates against minorities and can cause an individual to pay higher rates based on factors that have nothing to do with their risk of loss. The industry has defended the practice by noting that it is typically only used to determine eligibility for discounts and claiming that credit history has proven to be an accurate predictor of loss.