N.D. Commissioner Pushes Bill to Redefine ‘Adverse Action’ of Credit Scoring

A bill supported by North Dakota Insurance Commissioner Jim Poolman would limit insurers’ use of credit scoring by expanding the definition of the prohibited “adverse actions” they can take based on the information.

The proposal, HB 1335, was debated in the House Industry, Business and Labor Committee, chaired by State Rep. George J. Keiser.

The bill would redefine an adverse action to include “an action by which an insurer provides a quote or an offer for insurance at less favorable terms than an insurer would have quoted or offered an applicant or insured if the applicant’s or insured’s credit report or credit-based insurance score had been more favorable.”

The bill also defines as an adverse action the instance in which an insurer provides a premium discount based on the applicant’s credit-based insurance score if the discount is not the maximum discount available from the insurer, according to an analysis by the Indianapolis-based National Association of Mutual Insurance Cos.

NAMIC has told state insurance commissioner Jim Poolman that the additional adverse action language would require a company to eliminate all other underwriting and rating factors but the
insurance score to meet the test required by the proposal.

There would be no other way for an insurer to identify the impact of an insurance score without isolating the score in the underwriting
process. To do so would be a violation of existing state law that requires companies to consider underwriting factors in addition to a credit-based insurance score, NAMIC said in a statement.

Regarding the discount language, NAMIC said it questions why an adverse action notice would be necessary for any consumer that receives a discount, arguing that the language would create the potential for more rather than less consumer confusion.