Alaska Superior Court offers ruling on credit history in underwriting

An Alaska Superior Court recently ruled that credit history can be used in insurance underwriting. That is a major victory for consumers, according to the Property Casualty Insurers Association of America (PCI).

“This decision upholds our contention that the use of this objective and effective underwriting tool benefits consumers and recognizes that regulation can often prevent consumers from obtaining innovative and cost-efficient products in the marketplace,” said Robert J. Hurns, counsel for PCI, which filed an amicus brief in the case, Progressive Casualty Insurance Co. v. Division of Insurance.

According to PCI, on Jan. 1, 2004, an act approved by the Alaska Legislature began regulating the use of credit history for insurance purposes. The Division of Insurance then issued two bulletins interpreting the statutes.

When Progressive submitted a proposed rate filing to the Division outlining a plan to renew individual insurance policies based on credit information developed when the insured’s policy was initially underwritten and rated, the Division objected. The Division claimed that the company could not consider credit analysis taken when the policy was initially underwritten.

The Division said it disapproved on the grounds that it was in violation of insurance code provisions against arbitrary and unfair discrimination, as well as in violation of the credit scoring law, which prohibits underwriting or rating a policy in whole or in part on a consumer’s credit history, according to PCI. Progressive then appealed.

The court determined that the insurer’s method of renewing policyholders at the same rate they were initially offered at the time the policy was issued “is far more equitable and efficient.”

“Under the Division’s plan, far more people would be frustrated by the difficulty or impossibility of continuing to receive a good rate and continued coverage, than under Progressive’s proposed rate filing,” the court said.

Topics Underwriting Alaska