A bill that would virtually prohibit insurers from using credit scoring in underwriting auto and homeowners coverage in Connecticut is unnecessary in light of federal law and insurance department regulations, according to the National Association of Independent Insurers (NAII).
In a hearing before the Senate Insurance Committee, the NAII presented written testimony opposing S.B. 451, which states that insurance rates or premiums may not reflect a policyholder’s credit history, unless it concerns nonpayment or late payment of premiums.
“Since 1970, the Federal Fair Credit Reporting Act (FCRA) has provided the legal basis for the use of credit reports by insurance companies,” Jay Jackson, Connecticut counsel for the NAII, commented. “Insurers use credit reports to achieve the long-standing underwriting goals of objectivity, completeness, equity, efficiency and profitability. There is no good reason for singling out insurers and preventing them from using credit information.”
Additionally, the Connecticut Insurance Department has set up rules governing credit scoring or measurements systems by requiring extensive documentation, and specifically spells out unacceptable uses of credit information. “We believe these rules adequately protect the insurance consumer,” he added.
Studies have shown a correlation between insurance scores and risk of insurance loss. Additionally, insurance scores do not discriminate against low-income consumers or minorities and are at least as accurate as other sources of information, such as motor vehicle records and claim reports, Jackson said.
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