FOR IMMEDIATE RELEASE

NAIC TESTIFIES ON THE USE OF
CREDIT-BASED INSURANCE SCORES

KANSAS CITY, Mo. (May 21, 2008) - On behalf of the National Association of Insurance Commissioners (NAIC), Florida Insurance Commissioner Kevin McCarty testified today before the U.S. House Financial Services Committee's Subcommittee on Oversight and Investigations hearing titled, "The Impact of Credit-Based Insurance Scoring on the Availability and Affordability of Insurance."

"Proponents argue that credit-based insurance scores are predictive of an insured's future claims experience, and are necessary tools for underwriting and/or rating. Critics argue that the use of credit-based scores are merely another example of imposed discrimination against lower income individuals and protected classes of people," said McCarty, who chairs the NAIC's Property and Casualty Insurance Committee. "The state insurance regulatory community has focused on credit scoring problems, and 48 states have taken some form of legislative or regulatory action limiting the usage of credit scoring in the provision of insurance products."

McCarty explained that the states have taken a variety of approaches on this issue:

• Some states have limited the use of credit scoring, requiring that it not be the sole rating factor used by insurers to evaluate risk.
• Some states believe that the process itself is not intended to be discriminatory, and any disparate impact based on race or ethnicity is merely coincidental.
• Some states believe that a majority of policyholders benefit from the use of credit scoring.
• Some states have taken issue with the use of credit scores and other rating criteria, such as occupation and education.

"As state regulators, it is our sincere desire that the federal government assist, not detract, from the states' regulatory efforts to address this important issue," McCarty said. "A more in-depth and objective study by the FTC on the relationship between credit scores and race/ethnicity is needed to determine if there is, in fact, a 'proxy effect' that shows a demonstrable correlation between credit scores and race/ethnicity."

Click HERE to view the full text of McCarty's testimony.

About the NAIC

Formed in 1871, 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 five U.S. territories. The NAIC has three offices: Executive Office, Washington, D.C.; Central Office, Kansas City, Mo.; and Securities Valuation Office, New York City.

The NAIC serves the needs of consumers and the industry, with an overriding objective of supporting state insurance regulators as they protect consumers and maintain the financial stability of the insurance marketplace. For more information, visit www.naic.org.

You are currently subscribed to the "NAIC News Release" electronic service.
For information regarding this service, please contact the NAIC Communications Division, 2301 McGee Street, Kansas City, MO 64108, 816-783-8909.

To unsubscribe from NAIC Electronic Services, send a blank e-mail to NAIC Opt Out services.

[ NAIC Web Site | Search NAIC and State Insurance Department Sites  ]
[ Copyright & Reprint Info | Privacy Statement]

©2008 National Association of Insurance Commissioners. All rights reserved.