The National Association of Independent Insurers (NAII) has offered to work with North Dakota Insurance Commissioner Jim Poolman as he compiles and analyzes the facts regarding insurers’ use of credit-based insurance scores.
During a public hearing held this week at the state capitol, NAII expressed that it wants to preserve the ability of companies to use all verifiable rating factors when underwriting policies to make fair and objective decisions.
“Insurers have found that insurance scoring is a powerful predictive tool in assessing the potential for risk of loss,” Laura Kotelman, counsel for NAII, said. “Experience has shown that policyholders with positive credit information are less likely to file claims. The use of insurance scoring helps insurers allocate the cost of insurance more fairly. Insurance scores enable insurers to price products with greater accuracy with every customer paying according to their potential for loss. This is fair for all consumers and means that costs can be lower for most consumers.”
NAII members companies report that nearly 70 percent of consumers pay lower rates as a result of this tool. “If it were eliminated or severely restricted these consumers would be penalized and forced to pay higher rates. In addition, many consumers who might otherwise have less access to or have been denied coverage for a variety of reasons, are able to find coverage because insurance companies use insurance scoring to underwrite policies,” Kotelman added.
As the use of credit information has become more widespread among insurers, regulators and legislators have taken a closer look at this issue. To date, most legislatures and regulators have rejected efforts to limit the use of insurance scoring. Public policymakers cite the numerous studies that show the distinct connection between a person’s credit rating and the likelihood of that person filing a claim as the primary reason for allowing insurance scores to be used in underwriting formulas.
“North Dakota consumers stand to benefit from the continued use of insurance scoring. Most companies that use insurance scoring treat it as just one of several factors in the underwriting decision. This tool helps insurers develop a more complete picture of the likelihood that claim will be filed. It helps to ensure that consumers pay their fair share for insurance,” Kotelman went on to say.
Topics Carriers
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