12 States Target Credit Scoring For Study
A multi-jurisdiction study on the controversial use of customer credit background by insurers to assess underwriting risk has been launched, with 12 states asking carriers for data on the issue.
Meanwhile, efforts to secure a ban on credit scoring that were announced on April 26 by Michigan's governor and in January by Missouri's governor appeared unlikely to overcome legal and legislative roadblocks.
The states involved in the new probe are Alabama, Indiana, Kansas, Louisiana, Maryland, Michigan, Missouri, Montana, Nevada, Oregon, Washington and West Virginia, said Randy McConnell, a representative for the Missouri Insurance Department, which is heading the study. He said it is also possible the study will involve a collaborative effort with federal authorities.
Meanwhile, Missouri Gov. Bob Holden in January had called for a ban on credit scoring after Missouri Insurance Department Director Scott Lakin released a study that found credit scoring hurt low-income and minority policyholders by rating them lower than people in wealthy ZIP codes. Insurers called the study flawed because they said it focused on impacts without assessing the accuracy and objectivity of the process.
Bills to impose a ban were introduced at the behest of the Democratic governor in the Republican-controlled Senate and Assembly, but neither managed to progress out of committee. Mr. McConnell said at this point their chance of passage is "slim to nil."
In Michigan, Democratic Gov. Jennifer Granholm and Office of Financial and Insurance Services Commissioner Linda Watters called for a regulation to ban credit scoring on home and auto insurance. A representative for the governor said the regulatory route was chosen because a Republican-controlled State House was "not interested" in such legislation.
Ken Ross, chief of staff for Ms. Watters, said they were very optimistic because Senate Majority Leader Ken Sikkema, R-Wyoming, had expressed support for a ban. However, Mr. Sikkemas press aide, Bill Nowling, said that was only the senators "personal position," not that of the Republican caucus. Mr. Nowling said if the measure passed the "arduous rulemaking process," he is "confident someone will challenge that rule" in courtmost likely an aggrieved insurance company.
The Washington-based American Insurance Association denounced the rule proposal as "misguided" and said the way to improve rates is to foster competition.
Reproduced from National Underwriter Edition, May 10, 2004. Copyright 2004 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.
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