Maryland Weighs Prohibition on Insurers’ Use of Credit Scores

Maryland lawmakers are weighing whether to prohibit insurers from using credit scores to rate auto policies — a move insurers say is a bad idea.

The economic matters committee of the House of Delegates recently held an initial hearing on the measure, which would further clamp down on insurers’ use of credit information in a state where it’s already tightly controlled.

Homeowners insurers in the state already are prohibited from using credits scores for underwriting and rating. However, auto insurers cannot use credits scores for underwriting, but are currently allowed to use credit scores in rating new policies. The new proposal would remove that use of credit scores for auto rating, which insurers say would hurt consumers.

“Maryland has already enacted comprehensive insurance scoring legislation, and there is no need to do anything further,” said Richard Stokes, counsel and regional manager with the Property Casualty Insurers Association of America, which testified against the bill during a hearing last week. “Numerous studies demonstrate that consumers benefit from the use of insurance scoring, and that a great majority either see lower rates or no effect.”

It’s not the first time that lawmakers have weighed whether to change the laws regarding credit scores and auto insurance. The current incarnation of the law was passed in 2002, in a debate described by PCIAA Lawyer Richard Enton as “the most contentious issue going through in the house economic matters committee in 27 years.

“Maryland’s law works,” he said.

Over the last several years, a number of similar measures were introduced but failed to make it out of committees in the house or senate in Maryland.

“Baltimore City and Prince George’s county have insurance rates that are astronomical and are higher mostly in poorer zip codes,” said Delegate Jill Carter, a Baltimore City democrat who is co-sponsoring the measure. Carter said that insurers’ use of credit history is a practice that “isn’t necessarily discriminatory in intention, but it is discriminatory in practice.”

Carter urged lawmakers to “consider how you can make it better in terms of not having blemished credit make car insurance so astronomical that people can’t afford it and you have the end result of people driving around without insurance.”

PCIAA was joined by several other insurer groups —including, USAA Insurance Co., the Maryland Insurance Alliance and the American Insurance Association — in opposing the bill.

In a related measure, the economic matters committee rejected a proposal to prevent insurers from asking potential auto insurance customers about issues unrelated to their driving records, such as the existence of accounts at retail stores. That measure, introduced by another Baltimore City democrat, Delegate Frank M. Conaway Jr., was rejected by the committee.