A prominent consumer advocate has called on insurance commissioners to suspend the use of credit background scores in rating insurance customers who suffer losses from Hurricane Katrina.
In a letter to National Association of Insurance Commissioner President Diane Koken, Birny Birnbaum, executive director of the Center for Economic Justice in Austin, Texas, said, "These consumers will be penalized by insurers' use of credit scoring because they were victims of a catastrophic event."
Even for the states with a "life events" exception for credit scoring, insurers fail to notify consumers of their rights, Mr. Birnbaum asserted.
Ms. Koken, who also serves as Pennsylvania insurance commissioner, declined to comment on the proposal.
Mississippi Insurance Commissioner George Dale said he had not yet had the opportunity to consider such an idea.
Robert Zeman, senior vice president of the Property Casualty Insurers Association of America, said it is important that "the appropriate state and federal regulators…take a careful and measured approach to addressing the unique issues that can affect an individual's credit history created in the aftermath of Hurricane Katrina."
Mr. Zeman noted that not only personal lines insurance but housing, job opportunities and the cost of credit itself will be affected by credit histories.
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