Legislation that would prohibit insurers’ use of credit information narrowly advanced out of the Colorado House Business Affairs and Labor Committee Thursday on a 6-5 vote. According to the Property Casualty Insurers Association of America, the insurance industry will oppose the measure when it reaches the House floor for consideration.
The legislation (HB 1143) prohibits property/casualty underwriters from using credit scoring for the acceptance, denial, renewal, or rating of potential insureds.
“This legislation is a major step backward and could hurt the majority of consumers in Colorado,” said Kelly Campbell, regional manager and counsel for PCI. “Every credible study demonstrates the strong connection between credit information and risk of loss. As a result, the use of insurance scores enable insurers to make more accurate predictions about which consumers are likely to experience claims. Insurers have been using credit information for many years and some companies report that up to two-thirds of their customers have lower premiums due to having a good credit-based insurance score. If companies were prohibited from using these scores, the lowest risk customers end up paying more to subsidize higher risk consumers.”
Nearly half of the states, including Colorado, have enacted laws based on a model developed by the National Conference of Insurance Legislators (NCOIL) that allows insurers to use credit information and establishes consumer safeguards on the application of this underwriting factor. Colorado lawmakers passed its law in 2004.
Source: Property Casualty Insurers Association of America