The Property and Casualty Insurance (C) Committee and the Market Regulation and Consumer Affairs (D) Committee met June 15, 2009.

During this meeting, the Committees:

• Received statements on the need to continue to study issues related to credit-based insurance scores.

• Reviewed some of the information provided during the public hearing held April 30.

• Listened to a presentation from Commissioner Joel Ario (PA) on his perspectives related to regulation of the use of credit-based insurance scores. Commissioner Ario identified two important issues worthy of further consideration: the actuarial basis and the measure of disproportionate impact on certain protected groups. Commissioner Ario suggested that regulators consider requiring the standardization of credit-based insurance scoring models and improving how the information on the use of credit-based insurance scores is communicated to policyholders and applicants.

• Listened to a presentation from Candace Thorson (National Conference of Insurance Legislators—NCOIL) on the NCOIL Model Act Regarding the Use of Credit Information in Personal Insurance. Ms. Thorson advised that the NCOIL model:

• Promotes so-called credit “passes” for persons impacted by extraordinary life events—such as divorce, illness, job loss, or death of a spouse—which could encompass fallout from the financial crisis.

• Prohibits an insurer from calculating an insurance score based on income, gender, address, ZIP code, ethnic group, religion, marital status, or nationality.

• Discourages insurers from taking an adverse action based on “thin” or non-existent credit—a circumstance common among seniors, young people, and low-income consumers.

• Prohibits insurers from treating negatively credit inquiries that a consumer did not initiate—as when banks mine credit reports prior to sending credit card offers.

• Prohibits insurers from looking negatively upon collection accounts related to a sickness or other medical event for which a consumer could not pay.

• Provides that insurers can only consider multiple inquiries from the mortgage or auto lending industries in any 30-day period as one credit “hit”—as these multiple inquiries indicate that a consumer has wisely shopped around for the best deal.

• Requires insurers, before taking an adverse action, to use credit reports issued or insurance scores calculated within 90 days from the time a policy was initiated or renewed.

• Directs insurers to re-underwrite or re-rate if a consumer or his/her agent requests it at annual renewal.

• Requires an insurer, if a consumer challenges his/her credit report and has it corrected, to re-underwrite or re-rate based on the new information—and return any amount of overpayment.

• Mandates that insurers provide key consumer notifications—including up to four credit-related reasons for an adverse action if credit was a factor and up-front notice that credit will be considered in underwriting and/or rating.

• Directs insurers to file their insurance scoring models with state insurance departments.

• Prohibits credit reporting agencies from selling insurance-related data to third parties that do not deserve it.

• Learned that NCOIL will consider an amendment at its 2009 Summer Meeting to target consumers whose fallen credit is traceable to the financial crisis not of their making—even though the model’s extraordinary life events language already applies.

• Discussed next steps and questioned interested parties from the insurance industry, credit scoring modelers and consumer representatives.

• Received written comments from Birny Birnbaum (Center for Economic Justice) providing background information and asking regulators to:

• Implement a moratorium on insurance scoring through available administrative procedures.

• Collect sufficient data to verify the veracity of claims by insurers related to the consumer impact of credit-based insurance scores.

• Engage with NCOIL on its model legislation.

• Asked regulators and interested parties to submit written suggestions for next steps to Eric Nordman (NAIC) (enordman@naic.org) by April 30, 2009.

• Decided to hold an open conference call to continue to discuss next steps.

Action Items: