The Minnesota House Commerce committee has approved legislation that would prohibit insurers from canceling or non-renewing a consumer based only on their credit-based insurance score.
The bill (HF 2492) originally banned the use of insurance scoring but was amended in committee to require insurers to consider other underwriting factors in addition to an insurance score. The amendment requires insurers to notify consumers that credit information will be used in underwriting, to consider no credit record as a neutral factor, and to exempt delinquent medical bills from consideration. In addition, insurers are prohibited from using insurance or non-consumer initiated credit inquiries as well as factors such as race, gender, or religion as part of the insurance scoring process.
“The amendment to the bill is a vast improvement, however some of the provisions are still troubling for the insurance industry,” Laura Kotelman, counsel for the National Association of Independent Insurers (NAII), said. “NAII is concerned that the provisions regarding medical exemptions and consumers with no credit records are unfair and will hurt consumers by forcing some low-risk policyholders to subsidize high-risk policyholders.”
Currently, extenuating circumstances involving medical bills are frequently resolved by exempting medical liens from insurance scoring models. However it is often impossible to distinguish a medical bill sent to collection from other types of debt that has been transferred to a collection agency. In addition, insurers have found that consumers with no credit record or short credit histories, frequently referred to as ‘no hits’, tend to experience greater losses than other consumers. “We are concerned that ignoring factors such as ‘no hits’ will result in consumers who are less likely to file a claim paying more for insurance and exempting medical bills will add a layer of subjectivity to an objective process. These exceptions damage the accuracy and value of the tool,” Kotelman said.
During the hearing NAII stressed to legislators that there is a strong connection between an individual’s insurance score and the likelihood of claims. It was also pointed out that there are many positive aspects to the use of insurance scoring, highlighting an insurer in Minnesota that was able to offer two-thirds of its policyholders lower costs as a result of insurance scoring.
“We will continue to discuss our concerns with legislators and work toward developing a bill that best serves the interests of Minnesota consumers,” Kotelman commented.
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