NAII Challenges Ohio Proposals to Restrict Insurers’ Use of Credit Information

The National Association of Independent Insurers has issued a statement questioning the effects of pending legislation in Ohio, which would restrict the rights of insurance companies to consider consumers’ credit information in making underwriting decisions, as being overly restrictive and likely to lead to premium increases.

“The Ohio Insurance Department’s draft rule attempts to define certain ‘unfair’ practices and establish standards for using credit history and insurance scores in the underwriting and rating of personal lines coverage,” stated the NAII bulletin.

“The rule in its current form would severely restrict the use of a proven underwriting and rating tool, to the detriment of the average homeowner, driver and insurance company alike,” Robert Hurns, counsel of the National Association of Independent Insurers (NAII), wrote in a letter recently sent to Ohio Insurance Director Lee Convington.

The NAII noted that it has the “following concerns about the proposed rule:
– The draft tends to cast the use of credit scores as an “unfair” practice. NAII asks that the word “unfair” be deleted from the draft since the association firmly believes that credit is legitimate, nondiscriminatory and helps make insurance underwriting more objective—producing more consistent results.
– A limitation should be included for the number of “items, aspects or significant factors of the credit history or insurance score that resulted in an adverse action. NAII suggests that the insurance company must identify the top three or four reasons that led to the adverse action.
– The section that mandates that premiums “must be adjusted to reflect any improvement in a policyholder’s score” should also include premium adjustments if the consumer’s credit has deteriorated. Adjustments following credit checks should be made in either direction.
– The prohibition on the use of catastrophic medical or health-related credit information should be deleted because no studies or experience exist to indicate that medical data is less predictive than non-medical credit data.
– Sections should be eliminated that would hamper companies that do not use credit information during annual renewals. NAII suggests that the rule require that insurers must check the score on a regular basis if they use credit at renewal, but not require a re-check every twelve months if they do not.

The NAII pointed out that an insured’s credit history is a valuable tool for companies in measuring the risks of future loss. Determining “whether the person made timely payments, opened many credit card accounts, and filed for bankruptcy” are therefore important considerations.

“Research shows that people who manage their personal finances responsibly tend to manage other important aspects of their lives—including maintaining their home and driving their car—responsibly as well,” the announcement stated.

Topics Carriers Ohio