Iowa is the first state this year to pass credit-based insurance scoring legislation based on the National Conference of Insurance Legislators’ (NCOIL) model act. The governor is expected to sign the legislation, the Property Casualty Insurers Association of America said in a statement.
Although some provisions were removed, the legislation — SB 2257 — that passed contained an important deviation from the NCOIL model, according to PCI. Based on the NCOIL model, insurers have three options regarding the treatment of consumers that have limited or no credit history.
Insurers can choose to not use this information or treat no credit or thin credit as a neutral factor. In addition, the model allows insurers to consider the absence of credit or a thin credit file if the insurer provides the insurance commissioner with evidence of the relationship between absence of credit or thin credit and the risk of loss. SB 2257 excludes the provision that allows insurers to use credit information if the insurer provides the insurance commissioner with evidence of the relationship between an absence of credit history or a very limited, or “thin” credit history and the risk of loss.
Since its adoption by NCOIL in November of 2002, the model act, or some form of the act, has been adopted as a regulation or enacted into law in 16 states.