NAII Seeks Changes in Utah’s Proposed Insurance Scoring Rule

The National Association of Independent Insurers (NAII) is urging the Utah Department of Insurance to revise its draft rule on credit-based insurance scoring to allow the use of this tool if risk-related factors other than credit information are considered.

NAII submitted comments to the department and recently testified that the draft rule goes beyond the statute passed last year. The new Utah law states that insurers can use credit in initial underwriting and thereafter give a discount in private passenger automobile policies, if used in conjunction with other factors. However the proposed rule states that insurers may not use credit information as the primary reason to decline or refuse to issue a new personal auto insurance policy.

“Our most important concern regarding the proposed rule is that it deviates so drastically from the clear intention of the legislature regarding the use of credit information,” said Ann Weber, counsel for NAII. “Using the term ‘primary’ creates a myriad number of problems in that it is difficult to define and it suggests that there is a weighing of factors. In addition, the legislature considered the primary limitation and decided against using that concept.”

As with previous rule drafts, NAII expressed its concern with the consumer notification requirements. NAII urged the department to remove a section addressing an insurer’s obligations if credit information is used. The obligations outlined go beyond the Fair Credit Reporting Act requirements and that of the new law.

NAII also requested that the enforcement date of the rule be changed to one year following the issuance of the rule to allow insurers adequate time to properly set up in-house systems to comply with the new rule.

In addition to this rule being considered by the department, a proposal to ban insurance scoring also was introduced this session. “The industry pointed out that with the rules under development for the law enacted last year, there was no need for legislation this session,” said Weber. The bill (HB 216) did not receive support in committee and was tabled. The Utah legislative session is scheduled to adjourn March 5, 2003.