AIA Warns of Harm to Idaho Market

The American Insurance Association (AIA) says a measure to restrict insurers’ use of credit scores will raise rates for two-thirds of policyholders and will significantly harm Idaho’s insurance market.

“This bill creates an unworkable law that will isolate and disrupt the Idaho insurance market,” Bill Gausewitz, AIA assistant vice president, western region, commented. “AIA is strongly urging Governor Kempthorne to veto this measure and to ask the legislature to develop a better solution to this issue again next year.”

The Idaho Legislature approved SB 1408 (Goedde-R) last week. The bill states insurers may not base underwriting and pricing decisions “primarily” on credit history information.

“Several states are currently debating legislation to regulate credit scoring,” Gausewitz pointed out. “However, no other state has adopted the approach of SB 1408 because they agreed it was unworkable. If this bill becomes law, a majority of customers in Idaho could see their insurance rates increase.”

SB 1408 applies a simplistic rule to a complex process. Insurers use the underwriting process to accept applications or renew a policy. Underwriting is a non-mathematical process based on guidelines, not formulas. This measure requires insurers to reduce business decisions to a mathematical formula. “This bill tries to put a square peg in a round hole,” Gausewitz said.

AIA reported that its association and other insurers offered amendments to make this measure more effective and less disruptive to business practices, however, the sponsors refused to accept any changes to the measure.

“This bill will create underwriting and rating rules unique to Idaho,” Gausewitz added. “Insurers will have a very difficult time offering competitive rates and complying with this poorly drafted measure.”

Gov. Kempthorne has 10 days to sign or veto SB 1408.