Insurers Show Positive Aspects of Using Credit Scores

Positive aspects of how the use of credit scores in insurance underwriting benefits consumers were demonstrated to Colorado state legislators this week.

Among the points presented at a financial responsibility forum sponsored by the National Association of Independent Insurers (NAII) were:

– A comparison of credit scores for various parts of the state showed the use of credit did not negatively or disproportionately impact people living in rural or urban areas, or minorities or lower income individuals.

– Using credit scores enabled one insurer to accept more and a greater variety of business than the company was comfortable writing in the past.

– A smaller, regional insurer was able to price its policies more accurately and better serve its policyholders, who were largely farmers and rural residents, as a result of using credit scores.

NAII Northwest Regional Manager Michael Harrold said NAII and its member companies hope to work with the Colorado Division of Insurance to fashion a regulation on the use of credit scores that contains reasonable disclosure and grievance provisions without unnecessarily intruding into legitimate insurance underwriting and rating practices.

The division has indicated that elements it is considering for a regulation include full disclosure at time of use, fair disclosure of adverse information reflected in a credit score, standards for the use of credit, a requirement that other criteria also be used in underwriting, and establishment of an internal company complaint/appeal process.

Deputy Insurance Commissioner Maryellen Waggoner told the forum some of the division’s concerns included that credit scores and credit history are not the same and that the use of credit scores might not allow for exceptions, such as for a person who pays all bills in cash. Other factors, she said, are that credit reports may be inaccurate and consumers are not given enough information on what creates problems with their credit score or how to remedy it.

Topics Carriers