What Does ‘Sole Use’ of Credit Scoring Mean’ Indiana Insurance Department, Attorney General Disagree

Indiana’s attorney general recently released an advisory opinion that directly butts heads with an earlier bulletin from the state’s insurance department on the meaning of “sole use” in Indiana’s new law regarding the use of credit scoring.

The Indiana Department of Insurance had issued Bulletin 123 interpreting the meaning of the “sole use” restriction language in the National Conference of Insurance Legislators (NCOIL) insurance scoring model bill that has been adopted by the Indiana legislature and the legislatures of 18 other states. Under the department’s interpretation, more than one factor, in addition to an insurance score, would have to change in order for an insurer to use that score as an underwriting or rating tool.

Insurer lobbying groups such as the National Association of Mutual Insurance Cos., the Insurance Institute of Indiana and others have argued that this interpretation was not consistent with the law adopted. The Indiana Attorney General’s office agreed, stating that “Bulletin 123 places restrictions on insurers that were not intended by the General Assembly.”

“The language is clear,” said Neil Alldredge, NAMIC state affairs director. “‘Sole use’ means ‘only.’ Any other interpretation is not consistent with the NCOIL model and Indiana law.”

The national implications of this opinion are also significant as the National Association of Insurance Commissioners (NAIC) Credit Scoring Working Group continues its work on a guide to assist
regulators in interpreting the NCOIL language.

“The latest version of the NAIC guide includes the same interpretation contained in the Indiana Department of Insurance Bulletin,” Alldredge said in a statement. “An Indiana-type bulletin represents a change in the law, not an ‘interpretation,’ and the Indiana Attorney General
opinion supports that argument.”

Alldredge said the NAIC group’s current proposal on how to interpret NCOIL’s “sole use” language is “clearly outside the intent” of the model law.

The Indiana opinion is also in line with an opinion issued in November of 2003 by the Kansas attorney general on the same issue. The Kansas Attorney General argued that altering the definition of “sole use” by regulation was not consistent with the law adopted by the legislature.