Minn. Lawmakers Approve “Sole Basis” Restrictions on Use of Credit Scores

Insurers will not be able to use a consumer’s credit history as the sole basis for underwriting decisions under a bill approved recently by the Minnesota State Legislature, according to the American Insurance Association (AIA). The bill, which is now on the desk of Governor Jesse Ventura, is the result of several months of discussions between lawmakers, regulators, insurance agents and the state’s property and casualty insurance industry, including the AIA.

“Credit-based insurance scoring is an accurate, cost-effective underwriting tool that benefits the majority of Minnesota policyholders,” said Paul C. Blume, Jr., AIA vice president, midwest region. “While AIA remains concerned with some vague language in the bill, overall we are pleased that Minnesota lawmakers have decided to allow their constituents to continue enjoying the benefits of insurance scoring.”

As introduced, the bill would have entirely banned the use of credit by insurers. As passed, HF2492/SF2363:

Bans the use of credit information without the consideration of other underwriting criteria;

Requires up-front disclosure that credit information will be used in the underwriting process;

Requires carriers to exclude credit history as a factor in canceling, non-renewing or rejecting coverage in “no-hit” situations;

Requires carriers to provide “reasonable” underwriting exceptions when an insured or applicant requests such exceptions in the event of a defined extraordinary life event; and

Requires carriers to file credit methodologies and support data with the Department of Commerce.

“When this process began several months ago, there seemed to be some support for throwing the baby out with the bathwater in an effort to correct perceived abuses of this tool,” Blume said. “We are gratified that the legislature realized a complete ban on the use of credit information would be anti-competitive and anti-consumer.”

Topics Legislation Minnesota