NAII Seeks Adjustments to Ark. Scoring Rules

The National Association of Independent Insurers (NAII) is asking the Arkansas Department of Insurance (DOI) to remove several what its feels are burdensome and costly requirements from its recently released directive on the use of credit-related information in underwriting.

In a letter to Insurance Commissioner Mike Pickens, the NAII detailed several areas where the directive, which becomes effective in September, either goes beyond the requirement of the federal Fair Credit Reporting Act (FCRA) or would require insurers to take action that will prove costly.

“Insurance scoring helps companies develop a more complete picture of an individual’s likelihood of filing a claim and ensures that low risk consumers do not subsidize high risk consumers,” James Taylor, southeast regional manager for NAII, said. “However, this directive places extreme burdens on agents and insurers that will be difficult to comply with and will add unnecessary expenses.”

NAII is seeking changes that would prevent the directive from extending FCRA protections to persons merely inquiring about insurance. Modifications are being sought in the section requiring insurers to file their models and provide the four major factors that have the greatest impact on a score.

In addition, NAII is asking the department to remove a section that appears to ignore the fact that “no hits” have higher loss expectancies than most policyholders that have credit histories. As currently written, this section could be interpreted to require insurers to use additional underwriting criteria that reflects credit as a neutral characteristic.

“We are looking forward to a continued dialogue with the department on this matter in hopes of addressing some of our concerns,” Taylor added.

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