The Alliance of American Insurers characterized the Delaware Department of Insurance current regulatory proposals on Credit scoring as “a good starting point for addressing the issue,” but indicated that they “should be more consistent with federal credit reporting law.”
At a Department hearing yesterday, Alliance policy manager Lynn Knauf testified that, while the Alliance is basically “in agreement with the overall intent of the department’s regulation,” it would recommend that “the measure be amended to more closely follow the adverse action notification and dispute resolution procedures already required under the federal Fair Credit Reporting Act,” in order to maintain consistency. “Conflicting requirements will only add unnecessary costs for insurers and confusion for consumers.”
Knauf praised the proposal’s overall goal of permitting insurers to continue to use credit scores, stating that, “Credit-based insurance scores are an effective risk determinant for insurers and their use provides key benefits for consumers, such as availability and consumer choice.” She noted, however, that the regulation should be amended to exempt surety contracts from its scope, and that the current definition of “insured” contained in the regulation is overly restrictive.
“The use of credit reports and scores provides insurers with a greater opportunity to write business in all markets,” Knauf explained. “In fact, use of credit data increases risk predictability and can improve the chance an insurer will accept a risk. By adding another level of sophistication to the process, the scores allow insurers to underwrite and price business with a greater degree of certainty. This enables consumers to obtain coverage at more accurate rates.”
Richard Stokes, government affairs representative for the Alliance’s Northeast Region, who also attended the hearing, took issue with opponents of credit scoring, who claim credit information can be unfairly skewed. He stressed that “Insurance scores do not discriminate against lower-income individuals. People of all economic levels have good and bad credit records. Income is NOT a factor considered in an insurance score. Credit information merely allows insurers to objectively measure the subjective factors of responsibility and stability.”
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