NAII Addresses Utah Credit and CLUE Concerns

The predictive value of credit-based insurance scores and loss history databases were highlighted recently as insurers explained the benefits of these tools for consumers to Utah’s Business and Labor Interim Committee.

Although the rules implementing Utah’s insurance scoring law were just approved June 13, several lawmakers have expressed interest in pursuing further restrictions. In addition to looking at insurance scores, the committee met last week to gain more information on how Comprehensive Loss Underwriting Exchange (C.L.U.E.) reports are generated and used by insurers.

“The National Association of Independent Insurers (NAII) and others have met with legislative leaders over the past few weeks to provide them with information that demonstrates the value and fairness of these tools,” said Ann Marie Weber, counsel for NAII. “Regarding insurance scores, lawmakers should give the current law time to work. It is just now being implemented, so it is premature to make changes. During the hearing we pointed to the University of Texas study that provides independent proof of the link between credit information and loss. We discussed how most consumers benefit from using insurance scores and loss history databases. In addition we told them that banning these tools will force lower risk consumers to subsidize higher risk policyholders.”

Loss history databases, such as C.L.U.E., have come under fire in a few states including Utah. However, insurers have always relied on historical data to help them accurately price insurance policies. “Claims history is one of the most important factors that insurance companies use to underwrite and rate homeowners insurance policies. C.L.U.E. reports have helped to speed up insurance transactions and provided homeowners and potential homeowners with important information before making a significant investment decision.

This is another tool that helps insurers gain a more complete picture of the risk involved which leads to fairer more accurate pricing of insurance,” said Weber.

The committee will continue to explore credit and loss history databases and it is expected that some legislators will file bills on these subjects when the 2004 legislative session convene next year.