Del. Restricts Insurers’ Use of Credit Scoring for Auto, Home Renewals

August 2, 2007

Delaware Gov. Ruth Ann Minner has signed legislation restricting the use of credit information in setting auto and homeowner insurance rates, making Delaware’s credit scoring law one of the toughest in the country according to the law’s supporters.

The new law prohibits insurance companies from using credit information to change rates when customers renew existing home or auto policies but allows the use of credit scoring in rating new policies.

Sen. Margaret Rose Henry was primary sponsor of the bill and Insurance Commissioner Matt Denn was an advocate of the legislation. The final bill was a compromise that followed attempts to ban all use of credit scorting by insurers.

“I’m pleased to be able to sign this legislation, which will save money for some insurance customers while also making our state one of the toughest in the nation when it comes to using credit information to set auto and homeowner insurance rates,” Minner said.

Under the new law, insurance companies will not be able to use credit information to change insurance rates when renewing the policies of existing auto and homeowner customers, though the use of credit is allowable for new policies. The legislation takes effect Jan. 1, 2008.

At renewal, if customers believe their credit has gotten better since they first bought a policy, they can ask their existing insurance company for a credit check. If the consumer’s credit has gotten better and would result in a lower rate, the insurance companies must give the lower rate.

“Use of credit scores can dramatically impact one’s life,” Sen. Henry said. “This legislation will give consumers some protection as it relates to increases in home owners and auto insurance rates.”

“Under this law, the consumer-requested check cannot be used to raise rates, only lower them, so there’s no harm in asking,” Commissioner Denn said. “It is this consumer-friendly provision that makes Delaware’s new credit scoring law one of the best in the country.”

According to the Property Casualty Insurers Association of America (PCI), while the original bill sought to ban the use of insurance scores completely, lawmakers crafted a compromise that allows an insurer to take into account the value of insurance scoring only when a new policy is written.

“This compromise is important because it permits low risk consumers to continue to gain some benefit from the use of this valuable underwriting tool,” said Richard Stokes, regional manager and counsel for PCI. “While the restrictions do hamper the proven accuracy of this tool, the compromise will put to rest this contentious issue that comes before lawmakers every year. Insurers only sought the ability to use the most accurate underwriting tools so consumers can benefit from accurately predicting expected losses.”

The state has posted tips for consumers who wish to take advantage of the new law online at

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