Legislation that would ban property-casualty insurers' use of consumer credit records to evaluate and rate customers has been introduced in the Colorado Legislature.
Rep. Dorothy Butcher, D-Pueblo, filed the measure (HB 1143) Tuesday in the state House of Representatives. The bill would bar property-casualty insurers from using credit scores to accept, deny or rate a potential customer for underwriting purposes.
The bill has been assigned to the House Business Affairs and Labor Committee. It is not the first time such legislation has surfaced, noted Christian Rataj, Western state affairs manager for the National Association of Mutual Insurance Companies.
"Insurance consumers have dodged this bullet in three of the past five legislative sessions," he said, "but it keeps reappearing like a bad rash that needs to be permanently cured."
Tiffany O'Shea, a spokesperson for the American Insurance Association, said the AIA also opposes the bill, and that Colorado consumers already have protections under current state law.
"It will be another difficult fight this year, but it is important to remember that Colorado has some of the strongest consumer safeguards in place with regards to insurer use of credit scoring," she said. "If insurers are unable to use this valuable tool, then Colorado consumers may have to pay more for their homeowners and auto insurance."
The debate over the role of credit scores in underwriting has occurred in numerous states in recent years. Consumer advocates have argued that credit should not be considered as a factor in determining a consumer's potential risk and that the practice of using scores has a disproportionate impact on low-income and minority consumers.
The insurance industry has responded with studies showing a correlation between credit score and risk–a point Mr. Rataj mentioned.
"It appears as though the advocates of a credit scoring ban just don't want to accept the repeatedly proven fact that credit-based insurance scoring is good for the vast majority of insurance consumers in the state as it assists insurance carriers in their efforts to provide insurance consumers with rates that fairly and accurately reflect a consumer's personal risk of loss exposure," he said.
"Insurance consumers who manage their personal finances responsibly, drive responsibly, and/or operate their businesses responsibly deserve to receive the benefit of their hard work and responsible behavior through lower insurance rates."
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