The Utah House passed a bill Feb. 5 allowing insurers to use credit-based insurance scores only to give their customers discounts.
“By requiring insurers to use insurance scores only to provide premium discounts and not allowing companies to charge higher premiums to higher risk consumers, House Bill 110 would effectively prohibit the use of this important rating factor in Utah,” said National Association of Independent Insurers (NAII) Counsel Ann Weber. “The result would be that a vast majority of consumers now paying less for insurance because of their responsible financial management will end up seeing their auto and homeowners premiums increase.”
Studies and the experience of many insurers clearly demonstrate that insurance scores are a very accurate predictor of the likelihood that a particular group of people will file insurance claims in the future.
“Because insurance scores are so accurate an underwriting tool, insurers that are free to use them without artificial restrictions can charge premiums that accurately reflect the risks involved,” she said. “Individuals who have favorable scores, who constitute the majority of the population, pay lower premiums and those with less favorable scores, who are greater insurance risks, pay higher premiums. That clearly is fairest for everyone.”
Insurers have found a high correlation between insurance scores and loss costs. The scores supplement other sources of underwriting and rating information that may be subject to errors, underreporting or misrepresentation.
“Insurance scores do not consider income, address, race, gender or marital status,” Weber said. “They provide an objective and unbiased tool for underwriting and rating insurance risks. Insurers should be encouraged to use those scores as much as possible, to benefit most consumers.”
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