The Property Casualty Insurers Association of America has issued a bulletin indicating that continued debate within the National Association of Insurance Commissioners’ Credit Scoring Working Group about definitions in state laws dealing with the use of insurance scores is” an unnecessary use of resources.”
The PCI urged regulators to focus on providing consumers the information they need to better understand how the use of credit affects their insurance score and how to take better control of their credit history.
Last fall the working group decided to develop so-called “Best Practices” surrounding the definitions of six terms that are commonly used in state laws that allow insurers to use credit scores and implement reasonable regulation of this important underwriting factor. PCI believes that state public policy makers are more qualified and better suited than an NAIC working group to define the terms of legislation enacted in their own states.
“The issues and definitions discussed in the Best Practices document have already been decided in almost all of the states through statute or regulation,” stated Robert Zeman, senior vice president, industry and regulatory affairs for PCI. “We believe the working group’s focus should be consumer education which is more in-line with the NAIC’s new ‘Get Smart About Insurance’ campaign. PCI would be happy to assist in an effort to deliver meaningful information to consumers on an issue that impact not only on insurance, but their ability to buy a home, secure good jobs and purchase automobiles or other consumer goods.”
PCI did offer specific recommendations to the working group on the six Best Practice definitions—adverse action, extraordinary life circumstances, neutral score/no hit, scoring model substitution standards, sole factor prohibition and periodic review of insurance scores—should the NAIC decide to proceed with its definitions and terms.
“Our suggestions are intended to ensure that the working group remains focused only on those areas where legislative language is identical so that any interpretations of these provisions are consistent from state to state,” Zeman continued. “Moreover, our comments stress that Best Practices adopted by NAIC should not undermine state authority to define or interpret laws applicable to the state or countermand any of the provisions of the recently enacted federal FACT Act that reauthorizes the use of credit-based insurance scores on a national level.”
The NAIC Credit Scoring (D) Working Group addressed their Best Practices list and accepted the amended definitions of periodic review of insurance scores, extraordinary life circumstances and submission to regulator policy. The working group will accept comments until March 23, 2004 regarding some of the definitions including the use of sole factor and neutral score/no hit policy.
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