Insurance News

NAMIC Testifies at Wisconsin Insurance Department Hearing on Credit-based Insurance Scores

Posted on: September 18, 2009

The following statement may be attributed to Neil Alldredge, senior vice president of State & Policy Affairs at the National Association of Mutual Insurance Companies (NAMIC). Alldredge testified yesterday at the Wisconsin Office of Commissioner of Insurance hearing on credit-based insurance scores.

The hearing was requested by three state legislators ? Sens. Lena Taylor and Terese Berceau and Rep. David Cullen ? to examine the use of “consumer credit information in personal lines insurance policies.” Commissioner Sean Dilweg invited consumers, insurers, insurance agents, and credit reporting agencies to testify.

“Credit-based insurance scoring is certainly the most studied rating and underwriting variable currently used by insurers. To date, 17 industry, state, or federal agency studies have been conducted, typically examining the correlation between credit-based insurance scores and the propensity for insured losses and/or the impact credit-based insurance scores have on low-income or minority populations. There have been several other studies conducted by state insurance departments during the last decade, as well. Each study resulted in the same findings: credit-based insurance scores are predictive of loss; the vast majority of consumers benefit from the tool; and, credit-based insurance scores are not a proxy for race or income.

“Credit-based insurance scores have been used for nearly two decades to more accurately assess risk and price coverage for automobile and homeowners? insurance policies. It encourages competition and enables insurers to offer coverage to more consumers at a fairer price, resulting in lower prices, better service, and more product choices.

“It would stand to reason that if credit-based insurance scores had a negative effect on availability or affordability, residual market mechanisms and consumer complaints would be skyrocketing. Neither is occurring. In nearly every state, the personal lines markets are competitive, vibrant, and healthy.”

© Copyright 2007, National Association of Mutual Insurance Companies (NAMIC).

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