The Property Casualty Insurers Association of America (PCI) recently announced that it is opposing legislation scheduled for a vote by Wisconsin Senate Thursday, Jan. 31st, that would prohibit insurers from using credit-based insurance scoring as part of the underwriting and rating process for auto and property insurance.
“We are urging lawmakers to support consumers and defeat Senate Bill 259,” said Greg LaCost, assistant vice president and regional manager for PCI. “Consumers benefit when the cost of insurance is matched to each individual’s risk of loss. Most people have good credit and pay lower rates as a result. Insurance scoring enables insurers to make more accurate predictions about which consumers are likely to sustain a loss. As a result, low risk consumers pay less for insurance.”
According to PCI, the use of credit information is currently regulated by the Wisconsin Commissioner of Insurance and regulations have been in place for over a decade.
LaCost said that a ban on the use of credit information will raise rates for many consumers who are less likely to incur a loss. Since insurers would not be able to use credit information, they would not be able to fine tune their underwriting and rating processes to more accurately distinguish low risk consumers from higher risk consumers. For some insurers, banning credit would result in most consumers paying higher premiums, he said.
PCI members write 51.3 percent of the U.S. automobile insurance market and 39 percent of the homeowners market.