The results of a multistate data call on credit-based insurance scoring appear to be preordained, according to lobbyists for the National Association of Mutual Insurance Cos. (NAMIC) and the Property Casualty Insurers Association of America (PCI).
NAMIC State Affairs Director Neil Alldredge expressed concern about whether the Missouri Department of Insurance—which will issue a report on the information from the states included in the data request and which earlier this year announced support for a ban on the use of
credit-based insurance scoring—could be balanced in its analysis.
Alldredge’s reservations were based on a study of the Missouri marketplace earlier this year that concluded that credit-based insurance scoring has a negative impact on minority and low-income
populations in the state. In a statement released by NAMIC, Alldredge cited a study by the actuarial firm EPIC Consulting which he said showed “precious little, if any, connection between the conclusions and data analysis. In essence, this report is a set of conclusions waiting for a study.”
Alldredge said that a larger study using the same assumptions is unlikely to reach a different conclusion. “Replicating a flawed methodology on a grander scale will only lead to more erroneous conclusions,” he said.
PCI lobbyist Robert Zeman also shared his reservations in a statement: “From the limited information regulators have shared with us, this study appears to be a conclusion in search of the facts. A few individuals who are adamantly opposed to the use of insurance scores are trying to create reasons why this important and valid underwriting and rating tool should be banned. Unfortunately, if the study follows the methodology used in previous research projects it will fail to recognize the most important factor considered by every insurance company when writing a policy—risk of loss.”
Alldredge also complained that the study was designed without carriers’ input and that a number of the states involved in the study have already passed legislation to restrict but not ban insurance scoring.
It has been reported that states including Alabama, Indiana, Kansas, Louisiana, Maryland, Michigan, Missouri, Montana, Nevada, Oregon, Washington, and West Virginia, have issued data calls, according to PCI, which also noted that the data call notice sent to insurers by the Indiana Department of Insurance indicates that 15 states are participating in the study.
Zeman encouraged state insurance departments and the NAIC to become involved in the study on the impact of credit scores on consumers that will be conducted by the Federal Trade Commission over the next 18 months, which he said will be more comprehensive and less politically biased.
The FTC study is required by the Fair and Accurate Credit Transactions Act, the law passed by Congress earlier this year that reauthorizes the federal Fair Credit Reporting Act. The FCRA has allowed insurers to use credit history to underwrite and rate automobile and homeowners policies since 1970.