New York Holds Hearings on Credit Scoring

October 22, 2003

The New York State Assembly Standing Committee on Insurance and the Assembly Puerto Rican/Hispanic Task Force is currently holding hearings on the use of personal credit information and credit scoring by the insurance industry.

The hearings are being chaired by Assembly Insurance Committee Chairman Pete Grannis and Puerto Rican/Hispanic Task Force Chairman Peter Riviera.

Yesterday they heard from Gerald L. Zimmerman, assistant general counsel for the National Association of Independent Insurers. Today it will hear testimony from Professional Insurance Agents of New York State Inc. President, T.J. Derella, CPIA, president of Kingstar Co. of Kingston, N.Y.

According to the NAII bulletin Zimmerman indicated that “Because New York law restricts the number of policies a company can non-renew to 2 percent of its book of business, massive non-renewals arising from the use of insurance scores will never be a problem in the state.”

The NAII bulletin noted that “Because most people have good credit, most people benefit when insurance companies are allowed to use credit-based scores to rate and underwrite auto and homeowners coverage, according to industry experts testifying at a public hearing today before the New York Assembly Insurance Committee.”

The PIANY announcement said, “Mr. Derella will offer a producer perspective on the use of credit scoring in personal lines underwriting, commonly known as ‘credit scoring.'” He’s scheduled to testify today, beginning at 11 a.m. in the Assembly Hearing Room, 250 Broadway New York, N.Y.

The NAII bulletin further summarized Zimmerman’s observations as follows:
“Zimmerman pointed out that prohibiting the use of insurance scores could result in higher premiums for New York consumers. ‘When Maryland banned the use of insurance scores for homeowners coverage, consumers there saw double-digit rate increases that are at least partially attributable to the ban,’ he said. ‘Why do that to New York consumers, who already pay the second-highest insurance premiums in the country?’

Because New York mandates three-year policies subject to the 2 percent exception, insurers need every tool at their disposal to properly underwrite new business. ‘An independent study conducted by the University of Texas concluded that poor insurance scores were predictive of claims filing, which makes credit scoring a useful underwriting tool for insurers,’ Zimmerman added.

‘The insurance industry is willing and eager to work with responsible legislators who want to enact sensible regulations on its use,’ he noted. ‘But a ban on the use of insurance scores will help no one and hurt the consumers this committee seeks to protect.'”

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