ACIC Opposes Credit-Ban Bill

June 17, 2004

The Association of California Insurance Companies (ACIC) is opposed to anti-consumer legislation that would hurt homeowners insurance availability and force insurers to charge rates that do not reflect the risk of loss.

The bill, SB 1323 by Sen. Deborah Ortiz (D-Sacramento), would prohibit insurance companies from using credit-based insurance scores in underwriting or rating homeowners insurance policies. The bill is scheduled to be heard by the Assembly Insurance Committee on June 23.

“Study after study confirms that a person’s credit history is a valid indicator of whether he or she will have an insurance claim. Even more compelling is the fact that insurers use this tool because it works. It would make no sense for them to base rates on information that fails to predict the likelihood of loss,” said ACIC President Sam Sorich.

“SB 1323 would force insurance companies to ignore credit history as an underwriting tool and impose unfair rates on their customers,” he added.

“If credit-based insurance scoring is not used and rates inaccurately reflect anticipated insured losses, some customers would end up paying more for their coverage in order to subsidize higher risk individuals who file a disproportionate number of claims.”

Sorich noted that insurers’ consideration of credit-based insurance scores gives consumers an opportunity to qualify for lower premiums and discounts. “SB 1323 would block this opportunity. At the same time, the use of insurance scores by homeowners insurance companies gives people with favorable scores a better chance to find insurance and often at prices that save them money.”

He added that insurance scores only consider a person’s credit experience and not race, income, address, nationality, marital status or age.

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