Minn. Senate Passes Legislation Restricting Use of Credit-Based Scores

Legislation that would prohibit insurers from canceling or non-renewing policyholders based solely on their credit-based insurance score passed the Minnesota Senate last week.

“While Senate File 2363 is an improvement over the original proposal that banned the use of insurance scores, the bill still contains requirements that dilute the effectiveness of the tool,” Laura Kotelman, counsel for the National Association of Independent Insurers (NAII), said.

The Senate bill requires insurers to notify consumers that credit information will be used in underwriting and to exclude credit as a factor if the consumer does not have a credit history. There is a provision that requires insurers to provide exemptions from insurance scoring if an individual’s credit has been affected by extraordinary life events such as catastrophic injury or the death of a spouse. In addition, insurers are prohibited from using insurance or non-consumer initiated credit inquiries as well as factors such as race, gender, or religion as part of the insurance scoring process. Insurers must also file with the Department of Commerce their insurance scoring methodology within 120 days of the effective date of the law.

The Senate bill is very similar to House Bill 2492, which has been approved by the House Commerce Committee.

“We will continue to seek improvements to this legislation. Insurance scoring has proven to be an effective tool in helping insurers assess risk. By excluding factors such as ‘no hits’ will result in consumers who are less likely to file a claim paying more for insurance and exempting medical bills will add a layer of subjectivity to an objective process. These exceptions damage the accuracy and value of the tool. In addition they are unfair and will hurt consumers by forcing some low-risk policyholders to subsidize high-risk policyholders,” Kotelman added.

Topics Carriers Legislation Minnesota Politics