Insurers, Agents Urge NCOIL to Pass Model Act on Credit-Based Scoring

November 22, 2002

The Alliance of American Insurers, American Insurance Association (AIA), National Association of Independent Insurers (NAII) and National Association of Mutual Insurance Companies (NAMIC) have called on the National Conference of Insurance Legislators (NCOIL) to pass the model, which is being considered as an amendment in the form of a substitute to NCOIL’s proposed Model Act Regarding Use of Consumer Credit Reports in Insurance.

“For the last two years, state legislatures have been struggling to adopt insurance scoring legislation that protects consumers and responds to the needs of agents and industry,” John Lobert, Alliance senior vice president, state government affairs, said. “Such legislation now exists at NCOIL, and its adoption as a model could allow numerous state legislatures to move on to other issues.”

The four trade associations, along with Allstate, State Farm and American International Group, sent a letter earlier this week to the members of NCOIL’s Property and Casualty Committee, urging them to adopt the substitute act sponsored by Rep. Tim Osmond (Ill.) as the NCOIL model. The Independent Insurance Agents and Brokers of America (IIABA) have also endorsed the Osmond substitute, marking a significant development in the ongoing debate over the use of credit-based insurance scoring.

“The substitute act being considered by NCOIL represents an important and essential agreement between the industry and the producer community on this highly-charged and controversial issue,” Deidre Manna, AIA assistant vice president, state affairs, commented. “We hope that NCOIL will appreciate the significance of this agreement, and approve the Osmond substitute as the model act.”

Specific provisions of the Osmond substitute include:

·A provision that insurers cannot deny, cancel, nonrenew, or base a policyholder’s renewal rate on credit data without considering other factors;

·A mandate that consumers be informed that their credit histories may be checked in connection with an application for insurance;

·A requirement that insurers give consumers the specific reason or reasons that an adverse action was taken against them based on credit;

·A prohibition on insurer use of factors like age, income and address in calculating credit-based insurance scores, as well as a prohibition on certain inquiries and items found on a consumer’s credit report (i.e., those that are coded as medical in nature).

“This bill protects consumers, addresses the concerns of the producer community and does not artificially impede insurers’ ability to use this accurate and cost-effective underwriting tool,” Robert Zeman, NAII senior vice-president, state government affairs, remarked. “This issue presents a chance for NCOIL to assert itself as a leader in the public policy arena, and we urge them to make the most of the opportunity.”

NCOIL’s Property & Casualty Committee is hearing testimony on the Osmond substitute, and could vote on the proposal as soon as Friday. Industry representatives urged NCOIL to adopt the model act now, rather than waiting until the group’s February meeting.

“NCOIL must act now in order for legislatures to consider this measure in the 2003 legislative sessions,” Neil Alldredge, NAMIC state relations manager, said. “As more than 30 state legislatures are expected to take up this issue in 2003, waiting until the February meeting will not allow most legislatures enough time to meet essential drafting, introduction, and committee deadlines. By February, the train will have left the station.”

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