National News

Insurers' Use of Credit Scores Faces Renewed Scrutiny by Regulators

The National Association of Insurance Commissioners (NAIC) has adopted a proposal to review the use of credit-based insurance scoring.

The NAIC said it will convene a public hearing to take testimony on how the insurance industry uses credit scores, what goes into an insurance credit score and what impact credit scoring has on consumer in today's economy.

"This is a critical issue for the NAIC to consider as part of the 2009 consumer liaison agenda," said New Mexico Insurance Superintendent Morris J. (Mo) Chavez, who chairs the NAIC/Consumer Liaison Committee.

"In this challenging economy, it is essential that insurance regulators have the necessary tools to prevent collapsing credit markets from unfairly impacting consumers."

Proponents for the use of credit-based insurance scores argue that they are predictive of an insured's future claims experience, and are necessary tools for underwriting and/or rating.

Critics argue that the use of credit-based insurance scores unfairly discriminate against lower-income individuals and some protected classes of people and that they have no loss mitigation benefit.

Forty-eight states have taken some form of legislative or regulatory action limiting the use of credit-based insurance scores, including:

Some states have limited the use of credit-based insurance scoring, requiring that it not be the sole rating factor used by insurers to evaluate risk.

Some states believe that the process itself is not intended to be discriminatory, and any disparate impact based on race or ethnicity is merely coincidental.

Some states believe that a majority of policyholders benefit from the use of credit scoring.

Some states have taken issue with the use of credit scores and other rating criteria, such as occupation and education.

Some states prohibit the use of credit-based insurance scores.

Sponsored by Tapco Underwriters Inc.

Comments? Click here to post a comment about this article

Subject Posted By Posted On
RE: credit score Mike F
Mar 23, 2009, 7:14 pm
No I think it's wtfchuck Lawyer
Mar 23, 2009, 4:26 pm
Credit Scoring and Ratings Realist
Mar 23, 2009, 4:17 pm
RE: RE: RE: Credit Scoring and Ratings wudchuck
Mar 23, 2009, 4:04 pm
RE: RE: RE: RE: Credit Scoring and Ratings AGENCY PRINCIPLE
Mar 23, 2009, 1:08 pm
RE: RE: RE: Credit Scoring and Ratings adirondacker
Mar 23, 2009, 12:54 pm
RE: RE: Credit Scoring and Ratings wudchuck
Mar 23, 2009, 11:52 am
RE: Credit Scoring and Ratings Adirondacker
Mar 23, 2009, 11:21 am
Credit Scoring and Ratings Roger
Mar 23, 2009, 9:51 am
RE: RE: ... but it's not my fault that I have 10 speeding ti Stat Guy
Mar 20, 2009, 7:37 am
RE: ... but it's not my fault that I have 10 speeding ticket NotSmartNuff
Mar 18, 2009, 2:05 pm
... but it's not my fault that I have 10 speeding tickets... Adirondacker
Mar 18, 2009, 12:28 pm
RE: RE: RE: future claims Stat Guy
Mar 18, 2009, 11:32 am
RE: RE: future claims wudchuck
Mar 18, 2009, 11:00 am
RE: CREDIT SCORING zam boot
Mar 18, 2009, 10:24 am
JUST ANOTHER BAILOUT Bill
Mar 18, 2009, 9:46 am
RE: future claims Stat Guy
Mar 18, 2009, 7:45 am
RE: Credit Scoring and the Criminal NotSmartNuff
Mar 17, 2009, 5:28 pm
use of credit scores and pricing Fred Revello
Mar 17, 2009, 5:23 pm
Credit Scoring and the Criminal Reverend-CPCU,CLU,FLMI
Mar 17, 2009, 4:29 pm
RE: Okay, they now want to bankrupt the insurance industry Kool-Aid Vendor
Mar 17, 2009, 4:28 pm
statistics wudchuck
Mar 17, 2009, 4:24 pm
RE: Cadoo - It's easy really...12:48 PM Really Quite Simple
Mar 17, 2009, 4:24 pm
RE: Okay, they now want to bankrupt the insurance industry Expert
Mar 17, 2009, 4:18 pm
Wudcheck- nothing's perfect Realist
Mar 17, 2009, 2:29 pm
GEICO & PGR Direct & credit scoring Rick
Mar 17, 2009, 2:24 pm
credit score wudchuck
Mar 17, 2009, 2:21 pm
Okay, they now want to bankrupt the insurance industry EGoyle
Mar 17, 2009, 1:48 pm
RE: It's easy really... Bluemax
Mar 17, 2009, 1:48 pm
RE: Throw reality and common sense out of the window nobody important
Mar 17, 2009, 1:46 pm
CREDIT SCORING AGENCY PRINCIPLE
Mar 17, 2009, 1:44 pm
Throw reality and common sense out of the window Realist
Mar 17, 2009, 1:40 pm
RE: RE: It's easy really... Mandy
Mar 17, 2009, 1:39 pm
RE: RE: It's easy really... bryan
Mar 17, 2009, 1:35 pm
RE: It's easy really... Chris
Mar 17, 2009, 1:25 pm
RE: RE: It's easy really... Dustin
Mar 17, 2009, 1:21 pm
RE: It's easy really... wudchuck
Mar 17, 2009, 1:06 pm
It's easy really... Cadoo
Mar 17, 2009, 12:48 pm
Future claims anonymous
Mar 17, 2009, 12:48 pm
future claims wudchuck
Mar 17, 2009, 12:36 pm
Citations??? matt
Mar 17, 2009, 8:40 am