San Diego–The National Conference of Insurance Legislators has given unanimous preliminary approval to a three year extension of model legislation regulating use of credit records to evaluate insurance risks.
State lawmakers and industry representatives agreed that the credit scoring legislation represented one of the single most successful efforts in NCOIL history to establish legislative standards on a controversial issue.
NCOIL approved the model law in November of 2002 and gave another approval for the measure yesterday at its annual meeting in San Diego in accordance with the "sunset" provision that would otherwise have seen the measure loose its NCOIL status.
Credit scoring has caused controversy because opponents contend it unfairly impacts on low income and minority consumers and does not account for certain unusual impacts on individual records.
Rep. George Kaiser, R-N.D., said the measure had been adopted in whole or in part in 27 states since its passage three years ago.
"This is the most successful piece of legislation we have ever adopted," said the chair of the Property-Casualty Committee. "This has withstood the test of time and legislative debate."
No consumer representatives such as Birny Birnbaum, director of the Center for Economic Justice, spoke at the hearing.
Mr. Birnbaum and others have called the legislation a giveaway to the insurance industry.
Neil Alldredge, state affairs director for the National Conference of Insurance Legislators, said the NCOIL lawmakers could take credit for the fact that credit scoring for the most part has disappeared off the radar screen as a controversial issue.
At yesterday's hearing, lawmakers agreed that they might take up the issue of amending the law to allow consumers who have undergone "extraordinary life circumstance" to exempt them from negative affects on their credit score.
Wes Bissett, senior vice president for the Independent Insurance Agents and Brokers of America, agreed that "this is an issue worth discussing."
"But you have to be careful because this can lead to some subjective judgments," he said.
The issue of the use of credit history in personal lines underwriting has been on the front-burner since the late 1990s when the practice increased substantially.
The p-c industry claims credit history is indicative of insurance loss, while opponents claim it is fundamentally unfair to tag consumers as poor insurance risks because of the their credit reports.
The NCOIL model prohibits any rating or underwriting action based solely on a credit score and also prohibits any such action based on the lack of credit history. In addition, it requires carriers or third party vendors to file credit scoring models with state insurance regulators.
But legislative efforts to curb the practice, while lessened over the past two years, have not disappeared.
According to State Net Financial Services Group, Washington DC, 92 bills have been introduced this year with nine enacted into law. In addition, there have been 11 regulations implemented.
The resolution was due for a final NCOIL vote of approval today, which Mr. Kaiser said is likely.
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