AK Gets Bill Banning Insurers’ Use of Credit-Based Scores

February 14, 2002

Alaska has joined the growing number of states considering legislation to prohibit insurers from using credit-based insurance scores.

“This legislation would result in higher insurance premiums for most consumers in Alaska,” asserted Michael Harrold, National Association of Independent Insurers (NAII) northwest regional manager. “Numerous studies and experience have shown conclusively that there is a very high correlation between insurance scores and the likelihood that a person will file an insurance claim in the future, enabling insurers to base their rates on the actual risks involved. The vast majority of consumers, who have favorable insurance scores, then don’t have to subsidize the smaller number of people who are higher risks.”

Senate Bill 286 and House Bill 395, introduced Feb. 8, both state: “An insurer or underwriter may not base a standard, rate, or rating plan, in whole or in part, directly or indirectly, upon a person’s credit rating or credit scoring.” Committee action has not yet been scheduled on either bill.

Harrold was in Juneau this week to discuss the bills with key legislators, including Sen. Kim Elton, D-Juneau, the sponsor of SB 286, and the Insurance Division.

As is common in many states this year, Harrold said, the value of insurance scores to most consumers must be explained and stressed to Alaska legislators and regulators. He added that the NAII will continue to make every effort to do that.

“Insurance scores provide insurers a more objective and unbiased tool for underwriting and rating insurance risks,” Harrold said. “Credit-based insurance 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, marital status or age. There are no studies that indicate that insurance scores discriminate against low-income or minority consumers, nor has any state insurance department sanctioned an insurer on such grounds. Using these scores definitely benefits most consumers.”

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