Louisiana legislation that would block insurers from using consumer credit records to rate hurricane-impacted residents is set to move to the floor of the state House of Representatives after being approved by its Insurance Committee.
Introduced by Rep. Cedric Richmond, D-New Orleans, House Bill 318 squeaked through the House Insurance Committee in a 7-6 vote.
According to the language of the bill, insurers would be barred from using any 2005 credit information "to underwrite or rate risks for any person who resided in an area that was gubernatorially declared to be in a state of disaster or emergency during" last year.
The American Insurance Association has voiced concern over the bill, which it says could harm consumers who improved their credit during 2005. AIA said that the bill's goal of easing the strain on victims of Hurricane Katrina has already been met by a directive from the state insurance commissioner.
"While H.B. 318 addresses an important consumer issue, it is one that is already being adequately handled," said John Marlow, assistant vice president of the Southwest Region for the AIA.
He added that the bill "may negatively impact both consumers and insurers because it is overbroad and excludes all 2005 credit information, and it excludes valuable information available pre-hurricane–more than half of 2005. Consumers with positive credit experience during this time period could actually be harmed."
With the committee's approval, the bill will now move to the floor of the state House, where it is likely to be voted on some time this week, according to AIA spokesperson Tiffany O'Shea.
Whether this bill will be approved by the full House remains unclear, Ms. O'Shea added, but the AIA has been conducting a "very strong lobbying effort" with state House leaders in opposition to the bill.
Although the state Senate has also looked at the credit scoring issue, Ms. O'Shea said that no companion legislation is currently being considered there.
Earlier this year, Louisiana Insurance Commissioner Jim Donelon, a Republican, issued Directive 196, which specifically categorized Hurricanes Katrina and Rita as catastrophic events.
The directive ordered insurers to "ignore all unfavorable entries entered into an individual's credit record beginning with entries posted on August 26, 2005, and all such unfavorable entries posted thereafter, that are related to Hurricane Katrina and/or Hurricane Rita."
Credit scoring has become a major issue for insurers and lawmakers throughout the country over the past decade. Insurance groups have been largely successful in staving off outright bans on using credit information, although many states, including Louisiana, have some form of restriction on such use.
"Louisiana already regulates insurer use of credit information and has strong consumer protections in place through both regulation and law, especially for extraordinary life circumstances such catastrophic hurricanes," said Mr. Marlow.
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