A bill to regulate credit-based insurance scoring substantially similar to a model bill formulated by the National Conference of Insurance Legislators (NCOIL) has been passed out of Illinois’ House Insurance Committee and is very likely to be sent to the Senate shortly, according to industry representatives in Springfield.
The bill, HB 1640, was authored by Rep. JoAnn Osmond, whose late husband Tim was instrumental in the formulation of NCOIL’s model bill to regulate credit-based insurance scoring. Osmond, like Tim an insurance agent, has already garnered more co-sponsors for the bill than votes needed to pass it out of the House and into the state Senate.
“If there’s an opportunity call the bill, it will pass,” Michael Tate, chief operating officer of the Professional Independent Insurance Agents of Illinois (PIIAI), told Insurance Journal.
“We expect it to get to the governor’s office with no changes,” said Phil Lackman, PIIAI’s vice president of government relations.
The bill would prohibit insurers from denying, canceling or non-renewing an insured based solely on a credit-based insurance score. It also would prohibit “sole-basis” renewal rating and requires insurers to recalculate insured’s insurance score at least once every three years.
The bill only applies to personal lines.
Even trade representatives for insurance companies, which in the past have opposed many restrictions on the use of credit-based insurance scores, were positive about the legislation.
“This bill is the perfect example of the industry in Illinois waiting to address concerns raised through credit scoring,” said Kevin Martin, executive director of the Illinois Insurance Association. “It’s far-reaching in its consumer protections. Other states are fighting bans [on credit scoring], but here it’s being done in a manner that won’t affect competition.”
Carriers made a mistake from the get-go on scoring, said Paul Blume, vice president of state affairs for the American Insurance Association.
“The biggest mistake the carriers made on scoring was we came up with this great tool to predict loss and didn’t tell anybody about it,” Blume said. Now the industry has finally caught up in efforts to educate both agents and insurance consumers about the use and meaning of credit-based insurance scoring, he said.
Aside from scoring, all parties are eager to meet with and see what direction Illinois’ new director of insurance, J. Anthony Clark, sees for the state’s insurance industry. New Gov. Rod Blagojevich, a Democrat, has not spoken out on any grand designs to regulate or otherwise alter Illinois’ very competitive property/casualty marketplace.
“We need direction from the department on how they’ll regulate,” Martin said. “At this point, we don’t know much about his goals.”
Clark has been invited to an industry legislative day March 18 in Springfield, and according to Tate has accepted the invitation. Tate said he did not expect a lengthy discussion of Clark’s vision for the insurance department to take place at the event.
Clark does not officially take office until April 1, but one pressing issue, according to Tate, is the number of vacancies in the Insurance Department. Tate said that of 330 Insurance Department positions, there were 89 vacancies. Many longtime bureaucrats took early retirement with the changeover to the first Democratic administration since the 1970s.
“There’s no immediate crisis,” Tate said, “but it would be irresponsible of me to say (I’m not concerned about the ability of the department to regulate an industry that occasionally steps into potholes, both on the producer and the carrier sides.”
While malpractice liability, workers’ compensation, among other things, were highlighted as areas in need of reform, the current political climate — Democrats control the governor’s mansion, the House and Senate — is not one especially favorable for the industry.
“We’ve got our flap jackets on,” Blume said. “Right now we’re on the defensive.”
So far the Democrats have “shown a lot of restraint,” Lackman said. “It’s a relief to those of us who expected a fast-track agenda. There will be a lot more debate, and a lot more we’re going to have to defend. That’s fine. We’re willing to debate our practices.”
Moreover, Lackman said he does not expect any call for stringent re-regulation of Illinois’ open market during a hard market, as most legislators and regulators know that would only make things worse.
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