According to the National Association of Independent Insurers, (NAII) Missouri House Bill 1821 would have a negative impact on consumers because of the burdensome impediments it imposes on insurers’ use of credit-based insurance scores.
“Credit-based insurance scores allow insurance companies to enter more markets and reward a majority of consumers with lower rates,” NAII Counsel Ann Weber said in comments submitted to the House Insurance Committee at a hearing on HB 1821 Feb. 26.
“Although HB 1821 does not outright eliminate insurance scores, it makes the use of them incredibly burdensome due to numerous unnecessary and arbitrary filing requirements,” she asserted. “Also, the enormous additional duties this bill would impose on the Missouri Department of Insurance is mind-boggling. A colossal increase in manpower and dollars would be needed. In this regard, it must be pointed out that no fiscal note has been attached to the bill, as is required.”
Provisions of HB 1821 would:
Require insurers that use credit scores to cancel or refuse to renew coverage or refuse to underwrite a policy, to file with the insurance director the factors that are used in a credit score, the algorithm along with underlying support including statistical validation, and any underwriting guidelines and supporting material for the use of the guidelines. Similar reporting requirements would be necessary if premiums were increased due to an insurance score.
“No other underwriting factor is treated in this way,” Weber said. “Such regulatory burdens would make it virtually impossible for companies to continue to use insurance scores.”
Require the Insurance Department to process all the information filed by insurers and set up a complete system to review requests involving cancellations, nonrenewals, premium increases and special reductions in coverage. The department also would have to establish statistical bases for reporting data regarding the relationship between consumer credit ratings and losses.
“We question the need for establishing such a database since several studies by independent groups have verified the correlation between insurance scores and future losses,” Weber commented.
HB 1821 also has conflicting provisions regarding methods of termination of insurance policies, Weber said. Those include numerous different time frames for canceling policies depending on a number of different factors including the length of the policy in effect.
“There is no basis for this type of legislation and no benefit to the consumer,” she added. “These variations in notice requirements will only succeed in additional record-keeping for insurers and the department. The department will be required to make judgment calls and set up an appeal process. The director will be required to review the case and possibly conduct a hearing. That would all add unnecessarily to the cost of doing business and regulating insurance.”
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