Insurers Balk at FTC Order for Consumer Data in Credit Score Probe

December 23, 2008

The Federal Trade Commission's (FTC) decision to order insurance companies to provide a wide array of consumers' personal information in connection with a study of credit-based insurance scores and homeowners insurance is unnecessary, costly and risks consumers' privacy, according to the insurance company trade group, the American Insurance Association (AIA).

"We are disappointed the FTC chose this route, despite the industry's good faith efforts to work cooperatively to find a sensible, secure, and cost effective alternative to provide the data the FTC says it needs to conduct its study," said David Snyder, AIA vice president and assistant general counsel.  "The use of a 'compulsory process' does not allay our serious concerns about the handling and protection of massive amounts of consumer data."

In July 2007, the FTC released a study - completed without demanding information from insurers - of automobile insurance and credit-based insurance scores, which further confirmed the efficacy, objectivity, consumer benefits, and risk-based value of such scores.  The orders issued today to the country's top nine homeowners insurance companies, by market share, are seeking data to help complete a study of credit-based insurance scores and homeowners insurance, as required by Fair and Accurate Credit Transactions Act of 2003. 

"The use of credit-based insurance scores benefits a vast majority of consumers and is one of the tools that enable insurers to provide sound pricing models.  We're confident the FTC, just as they found in their auto study, will learn the same thing in this latest examination," added Snyder.

However, the AIA said that FTC has demanded information "far beyond what is needed, and often data insurers do not even collect, to complete their study of homeowners insurance and credit-based insurance scores."

"Consumers should be very concerned that the FTC has ordered companies to hand over such a vast amount of data, including items like a policyholders social security number and mortgage information, with few assurances as to how that data will be analyzed, handled, stored and used.  We will be watching this process as it plays out to do our best to ensure that company and consumer interests are protected," added Snyder.