According to the Washington, D.C. office of the American Insurance Association (AIA), a state insurance regulator’s working group is being pressured by the National Association of Insurance Commissioners (NAIC) to develop “best practices” that would apply to insurance company use of credit-based insurance scoring.
“There is no precedent for this type of action by the NAIC or any subset of its members,” said David Snyder, AIA vice president and assistant general counsel. “The ‘best practices’ that the Credit Scoring Working Group (CSWG) is considering will undercut the laws and regulations on this issue that have already been enacted in more than 30 states.”
In a recent letter to the NAIC, AIA further notes, “[this] activity poses a threat by potentially imposing standards on insurers in litigation that are not found in laws and/or regulations.”
“The CSWG began this effort as a process to develop uniform interpretations of existing terminology, where certain similar legislative and regulatory language was used in the states. It has now ballooned into trying to define industry ‘best practices’ without regard for any model or for any particular set of laws. It appears the CSWG is taking a back door approach to developing its own model,” Snyder said.
AIA advised the NAIC that, if this project is to move forward, it should be done as initially described (as uniform interpretations) and should: 1) ascribe similar meanings only to legislative language that is the same; 2) interpret the terms in a manner consistent with the actual legislative language; 3) not encroach on legislative authority; and, 4) not be inconsistent with applicable federal law or the laws of one or more states.
“This CSWG initiative essentially is a back door effort by a small group of regulators to further restrict insurer use of credit information in potential conflict with federal and state laws. This back door approach, if agreed to, would bypass the official NAIC process and further erode the NAIC’s legitimacy,” stated Snyder.