New Tally Of Credit-Based Insurance Scoring Laws
NU Online News Service, Oct. 12, 4:05 p.m. EDT?Pennsylvania and Vermont are the only two states that have not enacted laws or regulations governing insurers' controversial use of credit background to grade customers, according to a new legislative box score from an industry trade group.[@@]
The analysis was released by the National Association of Mutual Insurance Companies in Indianapolis, which found five states have some credit scoring prohibition in place and 27 have a form of legislation that insurers favor.
According to NAMIC's analysis, while the laws and regulations vary considerably from state to state, they all generally establish restrictions or mandate procedures that insurers must follow if they wish to use credit-based insurance scores as an underwriting and rating tool.
Ken Marshall, NAMIC state affairs information manager, said, "The majority of state laws and regulations addressing insurance scoring pertain to five key
provisions contained in the insurance scoring model law developed by the National Conference of Insurance Legislators (NCOIL)."
Mr. Marshall said, "NAMIC advocates that states use the NCOIL model and was instrumental in its development."
Under the NCOIL model there are prohibitions against use of certain negative credit factors, and insurers are required to notify policyholders and applicants that credit history information will be used and tell them about adverse decisions based on
credit history information.
The NCOIL legislation also requires insurers to establish dispute resolution mechanisms, reevaluate scores based on disputed information, and imposes state filing and approval requirements.
According to NAMIC 27 states have passed laws or adopted regulatory provisions patterned after the key NCOIL insurance scoring provisions.
The trade group said Georgia, Hawaii, Maryland, Oregon and Utah have
approved some type of prohibition on the use of credit history information. Most of these prohibitions apply exclusively to automobile insurance.
Opponents of credit scoring say it unfairly impacts minority and low income customers and fails to properly account for various factors that can skew results.
Use of the credit scoring process is currently the subject of studies by Congress and the State of Texas.
NAMIC's complete analysis of credit-based insurance scoring laws can be found on NAMIC
Online at http://www.namic.org/reports/credithistory/credithistory.asp.
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