Wisconsin Bill Would Ban Insurers' Credit Rating Use

A Wisconsin bill to ban insurers' use of credit ratings to evaluate and set customer policy rates is gaining impetus, according to an aide to the measure's sponsor.

Although the bill ran out of time when it was introduced last year, it seems to be catching bipartisan momentum within the Assembly as the term draws to a close, said Tom Powell, aide for State Rep. Terese Berceau, D-Madison.

The legislation prohibits an insurer from issuing, renewing or planning ratings for property and motor vehicle insurance based on an individual's credit rating.

Explaining the measure's "strong bipartisan support, Mr. Powell said it was originally a Republican bill and has Republican support from State Sen. Carol Roessler, R-Oshkosh, and Rep. Joan Ballweg, R-Markeson, among others.

"We have a lot of sponsors signed on to the bill and, because the Senate has gone Democratic, the likelihood is fairly high that it will get a hearing," said Mr. Powell.

The current law prohibits discriminating among policyholders by charging different premiums or offering different terms of coverage. The exception is on the basis of classifications relative to the degree of risk covered, according to an analysis by the Legislative Reference Bureau of Wisconsin.

But the insurance industry opposes the legislation, said Eric Englund, president of the Wisconsin Insurance Alliance. Using an individual's credit rating is a legitimate part of underwriting.

It is a "sophisticated metric that's available that allows insurers to do a better job of the very thing people want them to do--which is to correlate the rates for the insurance policies with the actual risk that the consumer brings," said Mr. Englund.

"The data shows that credit information is a legitimate and acceptable metric to be used in predicting claims behavior," he added.

Ms. Berceau said credit reports often have mistakes and are a poor determinant of whether someone should be insured or how much he or she should pay for coverage.

"A good credit history does not mean you get a favorable credit score or favorable insurance treatment," said Ms. Berceau.

The bill is pending with the Assembly Committee on Insurance and no date for a hearing has been set.