Boston–A National Association of Insurance Commissioners working group looking into regulating the controversial use of claims history in personal lines underwriting has taken no action after hearing insurance industry and consumer representatives square off on the issue.
The panel put off any decision on whether to create a model law or regulation, or develop something like a "statement of principles" to help guide their states in legislating on this issue.
Use of loss history in data bases such as ChoicePoint's Comprehensive Loss Underwriting Exchange has been questioned by opponents who contend the data can be flawed and consumers can be unfairly penalized when a claim inquiry is recorded as an actual claim.
Consumer representative Birny Birnbaum, of the Center for Economic Justice, urged the regulators at Sunday's session not to shrink from their responsibility to address the issue.
"You don't want to do what you did with [consumer background] credit scoring and sit on the sidelines while NCOIL ran with the ball and created its own model," Mr. Birnbaum said.
Texas State Rep. Craig Eiland, D-Galveston, president of the National Conference of Insurance Legislators, told the panelists his group expects to pass a model law regulating the practice at its summer meeting next month.
But Mr. Birnbaum said that model contained no meaningful consumer protections. "And what is worse, it has a bunch of pretend protections," he said.
Don Cleasby, of the Property Casualty Insurers Association of America (PCI), said that claims loss history use refines underwriting to the point where it expands the availability of coverage by better matching risk to pricing.
But District of Columbia Insurance Commissioner Larry Mirel said that it could have the effect of limiting coverage if it makes insureds wary of making claims for fear of having to pay for them down the line with rate increases.
Mr. Birnbaum said insurers will always look for ever more sophisticated underwriting tools to find the most profitable customer, and there comes a point when such a practice is against the interest of good public policy.
Jeff Skelton, whose ChoicePoint company operates the Comprehensive Loss Underwriting Exchange, said his company is constantly making refinements to meet both consumer and insurer complaints to provide the most equitable system of providing loss history data.
But seemingly simple issues such as ensuring that mere inquiries do not count against a policyholder become complicated when the point at which a claim file is actually opened is unclear, he explained.
Roseanne Mead, the committee chairperson, after grilling the speakers on their position on the NCOIL model, indicated the NAIC make take the approach they took on credit scoring and leave the model law crafting to the legislators.
Mr. Cleasby spoke for much of the industry when he said he hopes the NAIC will take a go-slow approach to whatever they do.
"I have had this issue come up in a number of states I am familiar with, and no one has said let's wait and see what the NAIC says we should do," he said.
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