NAII Says Minn. Dept. of Commerce is Spreading Disinformation

According to the National Association of Independent Insurers (NAII), the Minnesota Department of Commerce is using the consumer education section of its Web site to spread disinformation regarding insurers’ use of credit-based insurance scores and to push its own legislative agenda. “We are outraged that the Department of Commerce would use what should be objective consumer information as a tool in its lobbying efforts,” Laura Kotelman, counsel for the NAII, said. “Commerce Director Bernstein has failed to be a true protector of the public interest and is now using taxpayer dollars to campaign for his agenda. This type of communication is inappropriate and goes beyond his role as regulator.”

The Department of Commerce has recently added information about insurance scoring to the “Tips You Can Trust” section of its Web site. Unlike “tips” on other issues in this section of the Web site, the department offers its political perspective stating, “The Minnesota Department of Commerce questions whether a person’s credit history can accurately predict the person’s driving skill, insurance claims activity, or insurability.”

The NAII noted that the department continues to editorialize by stating, “Commerce Commissioner Jim Bernstein believes that Minnesota law must be changed. Currently, the law does not prohibit insurance credit scoring if it is used properly in conjunction with other underwriting criteria. However, it has yet to be determined if credit scoring discriminates against minorities, the elderly, the poor, or other groups. The burden is on the insurance industry to demonstrate that credit scoring does not single out any one class of people.”

The piece does not include information provided by insurers that is contrary to the department’s position and concludes with a call to action instructing consumers to contact their state legislators and encourage them to reform the credit scoring laws to protect consumers from being unfairly penalized by their insurance companies.

“Commissioner Bernstein’s public statements have repeatedly ignored key facts in an attempt to raise concerns regarding discrimination. It is this type of posturing that poses the real harm to consumers. The insurance industry can point to numerous studies that have found a correlation between insurance scores and risk of loss and most regulators acknowledge that a relationship exists,” Kotelman said.

“In addition, his concerns about redlining and discrimination are clearly not based on facts. The Virginia Bureau of Insurance looked at the relationship between credit scores and race and concluded that credit scoring is an ineffective tool for redlining. Studies show that there is great similarity in the average insurance score for all income groups and this holds true regardless of where people live. During legislative hearings we have pointed out that there are many positive aspects to the use of insurance scoring. One insurer in Minnesota is able to offer two-thirds of its policyholders lower premiums as a result of insurance scoring. Preserving insurer’s ability to use insurance scoring is truly in the best interest of consumers because it helps companies make objective decisions based on a consumer’s claim potential,” Kotelman commented.

The Minnesota legislature is currently considering restricting the use of insurance scoring. NAII has expressed its concerns that provisions in the bills regarding medical exemptions and consumers with no credit records are unfair and will hurt consumers by forcing some low-risk policyholders to subsidize high-risk policyholders.

Topics Minnesota