CONSUMERS AND CREDIT: REGULATOR
HEARING TO REVIEW
SAN DIEGO (March 16, 2009) - The National
Association of Insurance Commissioners (NAIC) today adopted a
proposal to review the use of credit-based insurance scoring. The
NAIC will convene a public hearing to take testimony on:
- What is a credit-based insurance score?
- How does the insurance industry use credit-based insurance
scores for pricing and underwriting?
- What is the impact on policyholder premium from credit-based
insurance scores in light of the current economic conditions?
"This is a critical issue for the NAIC to consider as part of the
2009 consumer liaison agenda," said New Mexico Insurance
Superintendent Morris J. (Mo) Chavez, who chairs the NAIC/Consumer
Liaison Committee. "In this challenging economy, it is essential
that insurance regulators have the necessary tools to prevent
collapsing credit markets from unfairly impacting consumers."
Proponents for the use of credit-based insurance scores argue
that they 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 insurance scores unfairly
discriminate against lower-income individuals and some protected
classes of people.
Forty-eight states have taken some form of legislative or
regulatory action limiting the use of credit-based insurance scores,
- Some states have limited the use of credit-based insurance
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.
- Some states prohibit the use of credit-based insurance scores.
More details about the public hearing will be posted to www.NAIC.org once they
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.
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