Massachusetts Enacts Law on Credit Ban for Auto Insurance

November 29, 2011

Massachusetts Governor Deval Patrick signed into law a bill that bans the use of credit in underwriting and rating private passenger motor vehicle insurance in his state.

The law, Chapter 195 of the Acts of 2011, was signed by the governor last week. The ban has already been in practice in the state but as an administrative regulation. This latest measure codifies into law the state’s current administrative ban on the use of credit scoring.

“We want to commend the legislature and the Patrick Administration for their leadership and support on this important issue,” commented Frank Mancini, President and CEO of Massachusetts Association of Insurance Agents. His group has been the driving force in the state to put into law the current ban on using credit information. (The use of other socioeconomic factors such as education and income levels will continue to be banned in the state but as administrative regulations, as they have been in the past.)

In October, Mancini and his association dropped their effort to put the issue on the statewide ballot initiative and had decided to focus solely on their legislative effort.

Massachusetts is already a state with some of the strictest bans in the nation regarding the use of credit information and socioeconomic factors in underwriting.

Mancini added that “especially during these difficult financial times, this legislation will provide Massachusetts consumers with much-needed protection against an unfair, unreliable, and discriminatory rate-setting practice.”

“People just don’t believe their financial woes or a mistake on their credit report should affect their ability to buy affordable auto insurance,” he said. “We were gratified to see so many officials on Beacon Hill share this sentiment and take action to prevent this from occurring.”

Mancini pointed to a poll commissioned in August by his association showing that Massachusetts voters overwhelmingly supported this measure. By a margin of 68.3 percent to 31.6 percent, respondents across diverse demographic groups believed that auto insurance premiums should be based as much as possible on an individual’s driving record and years of driving experience.

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