National Underwriter
July 17, 2003

U.S. Panel Okays Insurance Credit Scoring Study

By Steven Brostoff, Washington Editor


NU Online News Service, July 17, 11:12 a.m. EDT—An Illinois Congressman yesterday won a Congressional panel's approval for a federal study of the effect of credit-based insurance scoring on consumer credit availability.

The language calling for a study by the Federal Trade Commission was tacked onto legislation reauthorizing the Fair Credit Reporting Act, which secured committee approval.

Authorization for the study came at a meeting of the Financial Institutions Subcommittee of the House Financial Services Committee, which voted 41-0 to approve H.R. 2622 reauthorizing the Fair Credit Reporting Act.

During the Subcommittee's consideration of the legislation, it adopted by voice vote the amendment offered by Rep. Luis Gutierrez, D-Ill., to have the FTC, in consultation with the Department of Housing and Urban Development, study the issue of insurance scoring.

Monte Ward, vice president of federal affairs for the Indianapolis-based National Association of Mutual Insurance Companies, said NAMIC is concerned about the Gutierrez amendment.

"States, not the U.S. Department of Housing and Urban Development, have jurisdiction over insurance and have been active in addressing this aspect of insurance regulation," Mr. Ward said.

He said that insurance companies have been utilizing credit scores as a predictor of future losses since 1996, which has resulted in substantial consumer benefits since it allows insurance companies to offer better products.

"Many states have looked at this issue, and adopted measures such as the National Council of Insurance Legislators' model, which strikes an appropriate balance between the needs of consumers and insurers," Mr. Ward said.

Anne Sittmann, a representative of the Des Plaines, Ill.-based National Association of Independent Insurers, added that insurers do not consider information such as race, income, geographical location or age in the use of insurance credit-scoring.

Regulation of insurance pursuant to the McCarran-Ferguson Act, she added, lies exclusively with the states.

It is inappropriate, Ms. Sittmann said, for any agency without jurisdiction over insurance to conduct a study.

Ken Schloman, Washington counsel with the Downers Grove, Ill.-based Alliance of American Insurers, said he is pleased that the FCRA preemptions are made permanent, but he is concerned by the Gutierrez amendment.

That amendment, Mr. Schloman said, takes the legislation into an inappropriate area.

The industry, he added, will have to see what other amendments are offered when the full Financial Services Committee considers the legislation.

The FCRA reauthorization makes permanent the current uniform consumer credit standards, which are set to expire at the end of the year.

Financial services industry representatives say that the federal preemption of contradictory state laws is necessary to create an efficient national consumer credit system.

In addition, H.R. 2622 contains new consumer protections aimed at enhancing the ability of individuals to correct false or misleading information in a credit report and at fighting identity theft.