Fla. Battle Over Credit Scoring Resumes

Florida's insurance commissioner said he has subpoenaed five national insurers to supply records and testify tomorrow about what they are doing to reduce the impact of credit scoring on consumers who qualify as low income or as a racial minority.

The action by Commissioner Kevin McCarty is the latest in a six-year battle in the state between insurers and the top regulator over insurers' use of consumer credit history to set their insurance premiums.

Companies called to appear at the state capital in Tallahassee are Allstate, GEICO, Nationwide, Progressive and State Farm.

The subpoenas requested that corporate representatives of each company, who are the most knowledgeable concerning credit scoring, attend the public hearing and be prepared to testify.

Mr. McCarty's announcement said specific issues subject to testimony that were mentioned in the eight-page subpoena include:

o The use of credit scoring models and credit information in underwriting and determination of rates.

o A response to federal and state studies that have determined use of credit scores and models have a disparate impact on certain classes of people.

o Actions companies have taken to address these concerns.

o Positive and negative effects that credit scoring has had on the consumer.

o Efforts companies have taken to ameliorate or reduce discrimination based on income or race.

o A detailed explanation of how credit scoring is used by the company.

o Impacts on the company if the use of credit scoring or credit information were prohibited.

o Documents and records that are the subject of the subpoenas are to be produced on or before the date of the hearing.

Florida Insurance Council Executive Vice President Sam Miller said all the companies were complying with the subpoena, which he called the latest in "the fight we've been having since 2003," when the legislature passed a measure approving the use of credit scoring.

However, he said, state regulators, in implementing the law, have continually come back with altered versions of a rule that would make use of credit scoring impossible in practical terms, calling the subpoenas "their latest strategy."

Last year, he said, insurers had successfully lobbied the cabinet of Gov. Charlie Crist, which led to withdrawal of a restrictive rules proposal, but the department "came back again three or four weeks ago."

Efforts are also being made, he said, to pass legislation prohibiting the use of credit scores.

A spokesman for Mr. McCarty, Ed Domansky said the industry had been "able to stall [regulations] repeatedly over the years."

He said the latest rule being proposed would require companies to make available to the Office of Insurance Regulation their credit scoring processes including their formulas and information on how it fits their underwriting.

He said the hearing is also designed to let consumers testify on how they see the effects of credit scoring

The commissioner, in holding hearings, is following the lead of the Federal Trade Commission, which last month subpoenaed nine carriers to appear at a hearing this coming April with additional information on how credit scoring data is used to set premium rates.