Alliance Disappointed with Fail of Credit Scoring Bill in Mont.

The Alliance of American Insurers is disappointed that the Montana Legislature has failed to pass a bill that would have struck a fair compromise on regulating how insurers use consumer credit histories in underwriting and rating policies.

The bill, SB 349, was based substantially on the National Conference of Insurance Commissioners’ (NCOIL) Model Credit Scoring Act, which has been enacted in several states, most notably neighboring North Dakota. However, it died on the House floor when a conference committee report that did not include amendments requested by Insurance Commissioner John Morrison (D) failed to pass.

“The NCOIL model has become somewhat of an industry standard that strikes a reasonable balance between the business needs of insurers and the concerns of consumers,” said Larry Kibbee, vice president of the Alliance’s Northwest Region. “It is disappointing that the insurance commissioner did not see it that way and worked to kill the bill in the final days of the session. Now we’re back to square one on this issue, and the legislature, which may adjourn at week’s end, won’t reconvene until 2005.”

In testimony supporting the bill, the Alliance pointed out that credit based insurance scores “are an effective risk determinant for insurers because they objectively measure the subjective factors of responsibility and stability. In this way their use provides key benefits for consumers, such as availability and consumer choice.”

He added that industry-wide, at least two-thirds of policyholders subject to credit scoring considerations receive lower, or discounted, rates due to their favorable credit.

According to Lynn Knauf, an Alliance policy manager that follows this issue closely, eight states have enacted bills regulating insurer use of credit information so far this year. They are: Colorado, Georgia, Kansas, Nebraska, North Dakota, Oklahoma, Virginia and Wyoming. In addition, the Alliance has tracked no fewer than 95 introduced bills and/or regulations in 41 states related to this subject this legislative session. Over half of these states have versions of the National Conference of Insurance Legislators (NCOIL) Model Act pending.