CREDIT-BASED INSURANCE SCORING ESSENTIAL IN ALASKA:

In response to proposed regulations that would prohibit the use of credit-based insurance scoring in the renewal of insurance policy underwriting, NAMIC testified on Aug. 30 at an Alaska Division of Insurance hearing that “at renewal, insurance carriers need the flexibility to engage in total circumstances analysis of the basis for change in a consumer’s credit score to ensure that consumers receive a premium rate that is commensurate with their current potential risk of loss exposure.” The proposed regulations concerned NAMIC because “they categorically prohibit the consideration of credit scores in policy renewal situations without consideration of the factual basis for the change in the consumer’s credit score,” according to State Affairs Manager Rataj. In essence, the proposed regulations: Outline the requirements for an acceptable insurance scoring model; Set for the statistical validation required for an acceptable insurance scoring model; Prohibit the use of credit histories in insurance policy renewals, unless the consumer waives the requirement in writing; and Limit how an insurer may use a “neutral credit” history report. NAMIC supports underwriting freedom and the use of credit-based insurance scoring because there is an irrefutable correlation between a consumer’s credit score and his potential risk of loss exposure, according to the association. Consequently, NAMIC suggests that the DOI consider drafting a provision that “affords insurance carriers an opportunity to evaluate all risk-of-loss based variables necessary for the carrier to determine if the insurance renewal applicant has had a change in circumstances that correlates to an increased potential for claims exposure,” Rataj said.

Topics Legislation