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FOR IMMEDIATE RELEASE STATES WORK
TO PROTECT CONSUMERS AGAINST CREDIT SCORING WASHINGTON, D.C. (Oct. 3, 2007) - Two members of the National Association of Insurance Commissioners (NAIC) testified before the U.S. Congress to share how their states have addressed the use of credit reports in insurance underwriting. Washington Insurance Commissioner Mike Kreidler and Hawaii Insurance Commissioner J.P. Schmidt testified yesterday before the Subcommittee on Oversight and Investigations of the House Financial Services Committee. Kreidler spotlighted Washington's law, enacted in 2002, which prohibits insurance companies from using credit history to cancel or non-renew a personal insurance policy. The law also bans the use of certain attributes of credit history to deny coverage or set premiums. "As of today, 48 states have joined Washington state and have enacted some level of regulation over this practice," said Kreidler, who also chairs the NAIC's Market Regulation and Consumers Affairs (D) Committee. "It is our responsibility as regulators to ensure that credit scoring does not unfairly discriminate and harm protected classes of people." Kreidler recommended additional actions that could be taken to protect consumers and protected classes from being harmed by the use of credit scoring: (1) Restore "adverse action" notices; (2) Make "adverse action" notices more meaningful; and (3) Require insurers to prove their models do not unfairly discriminate. Schmidt's testimony focused on the impact that Hawaii's ban on the use of credit bureau rating in the pricing of premiums has had on its automobile insurance market. Hawaii has prohibited the practice since 1987. "Twenty years of experience has provided no evidence that Hawaii's statutory exclusion related to the use of credit bureau ratings in the pricing or underwriting of insurance has diminished the efficacy of the Hawaii insurance market," Schmidt said. "While it has been actuarially demonstrated that there is a correlation between an individual's credit score and the propensity for that individual to be involved in future claim activity, that relationship provides only a portion of the information needed to develop and to regulate an insurance rate regulatory system." Click HERE for the full text of Kreidler's testimony. Click HERE for the full text of Schmidt's testimony.
About the NAIC Headquartered in Kansas City, Missouri, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and the five U.S. territories. The NAIC's overriding objective is to assist state insurance regulators in protecting consumers and helping maintain the financial stability of the insurance industry by offering financial, actuarial, legal, computer, research, market conduct and economic expertise. Formed in 1871, the NAIC is the oldest association of state officials. For more than 135 years, state-based insurance supervision has served the needs of consumers, industry and the business of insurance at-large by ensuring hands-on, frontline protection for consumers, while providing insurers the uniform platforms and coordinated systems they need to compete effectively in an ever-changing marketplace. For more information, visit NAIC on the Web at: http://www.naic.org/press_home.htm.
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©2007 National Association of Insurance Commissioners. All rights reserved. | ||
