Credit Score Ban Bill Falls In Colorado

The Colorado House on a 39-26 vote yesterday defeated a bill that would have banned insurers from using customer credit histories for insurance rating and underwriting.

Insurance trade groups said the measure was defeated because lawmakers accepted insurers' arguments that it was unfair to consumers and would have had a negative effect on the marketplace.

“The vote to defeat HB 1143 is proof that legislators in the state see that the proposed credit-based insurance scoring ban would have adversely impacted market competition in the state, forced rate subsidizations on a significant number of consumers, and made it more difficult for insurance carriers to offer consumers fair, risk-based rates,” commented Christian J. Rataj, National Association of Mutual Insurance Companies Western state affairs manager.

Fred Bosse, American Insurance Association vice president, southwest region. noted that the Colorado Legislature had passed a comprehensive law in 2004 that, he said, “has strong consumer protection and disclosure laws on insurance credit scoring. It protects people who have no credit history, debt due to divorce, identity theft and even medical collections.”

It was the fifth unsuccessful attempt to secure a ban on credit scoring by the measure's prime sponsor, Rep. Dorothy Butcher, D-Pueblo, a retired finance analyst. The Colorado House is currently controlled by Democrats.

Ms. Butcher said she could not say why members of her party had not supported the bill, “I don't know what they didn't understand. They didn't tell me anything. Only three members approached me and said they would vote against it.

However, she noted she had been “lambasted” by a Farmers Insurance lobbyist and that insurance agents had bombarded lawmakers' with objections.

She said she did not know if she would bring the measure up again.

AIA's Mr. Bosse said that had the measure become law, “a large percentage of Coloradans could have paid more for their insurance and subsidized those who pose a greater risk to their insurance company.”

In NAMIC's view the legislation “would have forced Coloradans with good credit-based insurance scores to pay more for their insurance.”

Mr. Rataj said the group is “pleased to see lawmakers have heeded the insurance industry's warnings about the dangers of banning the use of credit-based insurance scoring and limiting a carrier's ability to provide consumers with thorough and equitable risk-based rates.”

He added, “As the industry illustrated to members of the legislature, studies have repeatedly shown that credit-based insurance scoring is a reasonable and appropriate underwriting and rating tool used to assist carriers in their endeavor to provide consumers with rates that are commensurate to their personal risk of loss exposure. Credit-based insurance scoring properly rewards and encourages all consumers to be thoughtful and diligent personal risk managers.”

The legislation would have prohibited insurers from using credit-based insurance scoring for the acceptance, denial, renewal, or rating of a potential insured in connection with property-casualty insurance.

In the wake of the vote, Mr. Rataj said, “We hope the proponents of this legislation realize that Colorado's consumer protection laws are already among the strongest in the country on this issue and that banning credit-based insurance scoring would be unfair and costly for most consumers.”

This article updated 3:06 p.m.