Colo. Agents Praise Credit Scoring Ban Defeat; Next Up: Wisc.

By | January 31, 2008

As the issue of credit scoring continues to be the subject of state legislative proposals, insurance agents in Colorado are celebrating the defeat of a bill that would have prohibited property/casualty insurers from using credit information as a underwriting factor for the acceptance, denial, renewal or rating of a potential insured.

“We are pleased it was defeated, but we know the battle is not over,” said Barbara Fidler, executive vice president of the Professional Independent Insurance Agents of Colorado. “We’ll continue to be on the watch for these kinds of bills.”

Fidler said that the elimination of credit scoring for insurance purposes has long been the subject of numerous legislative bills in Colorado. “Historically, the real estate industry was pushing it,” said Fidler. “A few years ago we worked with them to educate them and they’ve stopped. But that history eventually became the flag lawmakers continued to carry based on consumer complaints and sometimes their own experience. Most recently the “D” word – discriminatory – has entered the discussion.”

Fidler dismisses those charges of unfairness, characterizing credit scoring as an important underwriting tool. “Credit scoring is a tool that helps insurers assess the risk and set the premium,” said Fidler. “We do not believe it’s discriminatory. It does not select races, it selects on your credit management. We believe the data shows that everyone starts out on a level playing field. Everyone has the same opportunity.” Fidler added that credit scoring is just one of many criteria that insurers use to underwrite a customer. “In Colorado, insurance is not solely rated on credit scoring,” said Fidler. “We have laws to prohibit that.”

As in past years, PIIA of Colorado followed the legislative proposal closely. “We started at the committee level,” said Fidler. “Our governmental affairs person testified there. When it passed out of committee and went to the floor, we took action. We had agents at the Capitol. They lobbied the lawmakers before they went into the chamber and they watched the debate. We had about 20 agents there, many of our members, plus some agents from Farmers and State Farm.”

Fidler said the agents were pleased when the Colorado House rejected the credit scoring proposal on Tuesday. “Our entire focus is on the outcome for consumers,” she said. “To have an outright abolishment of credit scoring would adversely affect the majority of insureds because most get a benefit from it. It would also impact those with poor scores because as they overcame their credit issues and improved their scores they would have no opportunity to have better rates.”

Meanwhile, in Wisconsin, insurance agents are following a similar measure being heard today on the Senate floor.

Ron Von Haden, executive vice president of the Professional Insurance Agents of Wisconsin, said his members are closely monitoring Senate Bill 259, but has not lobbied lawmakers so far. “We have stayed on the sidelines on this one,” said Von Haden, “but we want to make sure the agents not placed in a more burdensome position than they already are.”

“Our concern is not that it’s invalid,” said Von Haden. “We can argue about the validity and develop studies back and forth all day long. Our concern is that while companies have developed this method for determining rates, agents are on the front line and are in an awkward position because the insured has suffered a rate increase because of a credit score. The agent has to look that customer in the eye and explain it to them.”

Von Haden believes there is a good chance that the bill might be approved by the Wisconsin Senate, but felt it would face a tough fight on the floor of the General Assembly.

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