Terms of Credit History Use Still Being Negotiated

The Texas Department of Insurance held a public hearing Jan. 7, 2004 to consider a proposal that would cap the amount by which insurance companies could increase or decrease rates in personal lines insurance because of an insured’s credit history.

In November 2003, in response to insurance reforms mandated by the legislature, the department adopted rules on credit-based scoring that allow insurers to use credit history in determining rates for personal line insurance, with some limitations. Under the rules, insurers can have differences in rates if they are based on sound actuarial principles and are supported by data filed with the department.

The proposed cap would limit to 10 percent the amount an insured’s credit history can influence their insurance premium.

Insurance companies have argued that such a cap would hurt low risk policyholders. In a Dec. 4, 2003 statement released by the National Association of Independent Insurers (now the Property Casualty Insurers Association of America), Southwestern Regional Manager Donald Hanson commented, “This proposal punishes people who have good credit while rewarding policyholders who file the most claims.” He added that “placing an arbitrary cap on how much rates can vary based on credit-based insurance scores will have a negative impact on most consumers.”

Consumer groups are not that happy about the proposed rule either. At the Jan. 7 hearing, consumer advocates complained that the actuarial justification clause creates a loophole that would allow companies to raise rates in excess of the 10 percent limit for customers with credit problems.

A TDI spokesman said Insurance Commissioner José Montemayor has 180 days from the time the proposed rule was published in order to make a decision. He could not say when Montemayor would decide on the proposal.

Meanwhile, TDI has posted a list on its Web site, indicating companies that use credit information for the purpose of underwriting and/or rating in personal lines of insurance. The list was updated as of Jan. 7.

Following are companies listed by TDI that use credit information in underwriting:

Personal auto only: AAA Texas County Mutual Ins. Co.; All America Ins. Co.; Auto Club Casualty Co.; Auto Club Indemnity Co.; Beacon Lloyd’s Ins. Co.; Boston Old Colony Ins. Co.; Central Mutual Ins. Co.; Charter County Mutual Ins. Co.; Charter Oak Fire Ins. Co.; Colonial County Mutual Ins. Co. – Allied Texas Agency MGA; Continental Ins. Co.; Electric Ins. Co.; Electric Lloyd’s of Texas; Farmers Texas County Mutual Ins. Co.; Fidelity & Casualty Co. of N.Y.; Firemens Ins. Co. of Newark N.J.; Foremost County Mutual Ins. Co.; Geico General Ins. Co.; Geico Indemnity Co.; General Ins. Co. of America; Germania Fire & Casualty Co.; Germania Ins. Co.; Germania Select Ins. Co.; Glen Falls Ins. Co.; Government Employees Ins. Co.; Hartford Accident and Indemnity Co.; Hartford Casualty Ins. Co.; Hartford Fire Ins. Co.; Hartford Ins. Co. of The Midwest; Hartford Underwriters Ins. Co.; Hochheim Prairie Casualty Ins. Co.; Home State County Mutual Ins. Co.; IDS Property Casualty Ins. Co.; Independent County Mutual Ins. Co.; Kansas City Fire & Marine Ins. Co.; Liberty County Mutual Ins. Co.; Massachusetts Bay Ins. Co.; Mercury County Mutual Ins. Co.; Metropolitan Casualty Ins. Co.; Metropolitan Direct Property and Casualty Ins. Co.; Metropolitan General Ins. Co.; Metropolitan Group Property and Casualty Ins. Co.; Metropolitan Property and Casualty Ins. Co.; Mid-Century Ins. Co. of Texas; National General Ins. Co.; Nationwide General Ins. Co.; Nationwide Property and Casualty Ins. Co.; Niagara Fire Ins. Co.; Old American County Mutual Fire Ins. Co; Phoenix Ins. Co.; Progressive Casualty Ins. Co.-Boat; Progressive County Mutual Ins. Co.-Motorcycle & Recreational Vehicles; Property and Casualty Ins. Co. of Hartford; Safeco Ins. Co. of America; Safeco Ins. Co. of Illinois; Southern County Mutual Ins. Co.; State Farm County Mutual Ins. Co. of Texas; State Farm Mutual Automobile Ins. Co.; Texas Farmers Ins. Co.; Travelers Indemnity Co. ; Travelers Indemnity Co. of America; Travelers Indemnity Co. of Connecticut; Twin City Fire Ins. Co.; USAA County Mutual Ins. Co.

Homeowners only: Allstate Ins. Co.; Allstate Texas Lloyd’s; American Modern Lloyd’s Ins. Co.; American National Lloyds Ins. Co.; American Standard Lloyd’s Ins. Co.; ASI Lloyd’s; Continental Lloyd’s Ins. Co.; Farmers Ins. Exchange; Fire Ins. Exchange; Foremost Lloyd’s of Texas; Hartford Lloyd’s Ins. Co.; Horace Mann Lloyd’s; Liberty Lloyd’s of Texas Ins. Co.; Metropolitan Lloyd’s Ins. Co. of Texas; Nationwide Lloyd’s; Petrolia Ins. Co.; Republic Lloyd’s; Safeco Lloyd’s Ins. Co.; Standard Fire Ins. Co.; Travelers Lloyd’s of Texas Ins. Co.; Trinity Lloyd’s Ins. Co.; Unitrin Preferred Ins. Co.; USAA Texas Lloyd’s Co.

Both personal auto and homeowners: Allstate County Mutual Ins. Co.; American Indemnity Co.; Amex Assurance Co.; Beacon National Ins. Co.; CMI Lloyd’s; Consumers County Mutual Ins. Co.; First Preferred Ins. Co.; Hanover American Ins. Co.; Hanover Ins. Co.; Hanover Lloyd’s Ins. Co.; Inter Ins. Exchange of the Automobile Club; Nationwide Mutual Fire Ins. Co.; Nationwide Mutual Ins. Co.; Service Lloyd’s; Southland Lloyd’s; Texas Gen. Indemnity; Travelers Personal Security Ins. Co.; United Fire and Casualty Co.; United Fire & Indemnity Co. ; United Fire Lloyds; USAA.

Topics Texas Auto Excess Surplus Property Property Casualty Lloyd's Casualty