The American Property Casualty Insurance Association is taking issue with tentative plans by the Colorado Department of Insurance to halt the use of credit information in Colorado during the pandemic.
A recent draft bulletin from the department directs property/casualty insurers to not use any adverse credit information related to the COVID-19 pandemic in determining the rate/premium of policies.
The draft has been posted on the department’s website. It has yet to be made official, but it has drawn concern from the APCIA.
“COVID-19 has disrupted many aspects of daily life for consumers and businesses. Insurers are ready to use current consumer protections in Colorado law to help consumers negatively impacted by this pandemic,” Lyn Elliott, APCIA assistant vice president for state government relations, said in a statement. “We appreciate the Department’s good intentions behind the draft bulletin, but the practical application of this bulletin will essentially ban the use of credit and make Colorado an outlier from other states. Colorado policyholders that currently benefit from the use of credit could see rate increases if this tool is limited.”
The draft bulletin defines COVID-19 as an “extraordinary life circumstance,” but does not entail the consumer notifying insurers that their financial situation has been impacted by COVID-19.
Without notification from insureds, there is no way for an insurer to know whether an individual has been impacted by COVID-19. This creates “a de facto ban on the use of credit, which is a contrast to other states that have identified COVID-19 as an “extraordinary life circumstance” and encouraged consumers to contact their insurance company, according to the group.
The bulletin states that insurers shall exempt the following extraordinary life events related to the COVID-19 emergency from the credit-based insurance score:
- Loss of employment;
- Mortgage, landlord/tenant, lender or credit card late payments;
- Late utility payments, including water, phone, electric and gas;
- Collection activity related to late payments; and,
- Medical collection activity related specifically to health care related to the COVID-19.
“Nothing in this bulletin precludes an insurer from voluntarily implementing a moratorium of the use of credit information to determine rates/premium. An insurer may choose to use an existing credit score or new credit score for renewal business only if it is the most beneficial to the policyholder,” the bulletin states.
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