CREDIT SCORING LEGISLATION APPROVED

On April 17, Governor Kathleen Sebelius signed HB 2071-giving the Kansas Insurance Department the authority to regulate credit-based insurance scoring. The law becomes effective January 1, 2004 and will:  Apply only to car and homeowner's insurance. No longer allow insurance scoring to be used as a sole factor in determining an insurance risk (it can be used that way now). Require a change in a traditional underwriting factor before credit can be used against a consumer. Require insurance companies to review the scoring process every 36 months. Require insurance companies to provide a consumer appeals process that is approved by the Kansas Insurance Department. Require insurance companies to file their methodology with KID. The Department is charged with making sure the methodology does not unfairly discriminate against a consumer.

View Results of the Credit Scoring Survey Conducted by the Kansas Insurance Department

Praeger Named to NAIC Post Sandy Praeger to Chair Health Insurance Task Force

Kansas Insurance Commissioner Sandy Praeger has been appointed Chair of the National Association of Insurance Commissioners' Health Insurance Task Force. The mission of task force is to respond to inquiries from Congress, the White House and executive departments
concerning the policy, regulatory and implementation implications of federal health care legislation.

Praeger Calls For Consumer Protection Bill Insurance Commissioner Wants to Regulate Credit Scoring Kansas Insurance Commissioner Sandy Praeger is urging Kansas lawmakers to adopt a bill that would regulate the use of credit-based insurance scoring. A task force appointed by the legislature recently reviewed the issue. "Today Kansas consumers have no state protections from the misuse of credit-based insurance scoring," said Praeger. "There has been too much confusion and suspicion regarding this practice. Consumers need assurance that the rates they are paying are fair."  Credit Scoring Task Force In May 2002, the Kansas Legislature approved Senate Concurrent Resolution No. 1623, which provided for the formation of a Task Force to study the desirability of regulation of insurance credit scoring practices.

It was the consensus of the Task Force that neither unfettered use of credit-based insurance scoring nor total ban of credit-based insurance scoring is an appropriate remedy or outcome. The Task Force concluded after deliberations that Kansas law does not provide specific
statutory oversight of the usage of credit based insurance scores, and that Kansas consumers need appropriate knowledge of the use of credit scores and how it impacts their insurance.

The Task Force also recommends the following components be considered in any legislative language proposed.Read report.

The fifteen member Task Force was formed by the Kansas Legislature to study the desirability of regulation of credit-based insurance scoring practices. The Task Force Report represents the views of the fifteen members and does not necessarily reflect the official position of the Kansas Insurance Department.

Kansas Insurance Department
420 SW 9th Street
Topeka, Kansas 66612-1678
1-800-432-2484

Kansas Commish Wants to Regulate Credit Scoring
February 11, 2003


Kansas consumers should be told how credit scoring affects their insurance rates, Kansas Insurance Department Commissioner Sandy Praeger said in a written statement.

Kansas now has "no specific statutory oversight of the use of credit-based insurance scores," Praeger said, meaning there are no restrictions on how credit scoring may be used by insurers in setting rates or deciding to deny, cancel or non-renew policies.

A task force created by the Kansas legislature last year agreed that there should be some limits placed on credit scoring, but that it should be not be banned entirely.

The Kansas Insurance Department has introduced legislation based on a model bill created by the National Conference of Insurance Legislators that was agreed to by insurers, agents and legislators.

The bill, which applies only to personal and not commercial lines, prohibits insurers from setting rates, denying, canceling, or non-renewing a policy based solely the credit score — or lack of credit history — and requires insurers to rescore a person's credit upon the applicant's request.

The bill also requires insurers or their agents to inform applicants that their credit report will be reviewed and explain any adverse action taken based on the applicant's credit score.

A.M. Best

Kansas Senate Passes Insurance-Scoring Bill

TOPEKA, Kan. 03/10/2003 (BestWire)-A Kansas bill with minimal restrictions on
insurers' use of credit-based insurance scoring has passed unanimously in the
state Senate, but another, more restrictive bill remains, according to an
industry group.

Senate Bill 144 would allow insurance scoring if insurers don't use it as the
sole criterion in underwriting and rating, the National Association of
Independent Insurers said. Under the bill, policyholders could request that
their scores be rerun once a year. When the policyholder requests the rerun,
the information could only be used to the policyholder's advantage.

The bill also would require insurers to rerun scores at least every three
years, depending on their underwriting process. When the insurer runs the
score, the information could be used to increase or decrease rates, NAII
said.

The bill, now before the House, is a hybrid of recommendations from the
legislative task force on insurance scoring, a model act developed by the
National Conference of Insurance Legislators, the insurance commissioner,
agents and insurers, according to the NAII. The House is to hold a hearing on
the bill March 13, according to the Kansas Legislature's Web site.

Insurance Commissioner Sandy Praeger supports Senate Bill 144, she said in a
statement.

Another bill, Senate Bill 176, would prohibit insurance scoring in the
renewal of insurance and as the sole basis for underwriting and rating, but
it hasn't left the Senate yet. "With the passage of SB 144, we hope that SB
176 will not advance," Ann Weber, counsel for the NAII, said in a statement.

Credit-based insurance scoring is being discussed in several states, and so
far Maryland has the strictest law, banning its use entirely in connection
with homeowners insurance. Nevada legislators are discussing a bill that
would ban the use of insurance scores in underwriting and rating. Meanwhile,
a study by the Alaska Department of Insurance has questioned the insurance
industry's claims that scores are effective, concluding that higher-income
areas might be less impacted by the use of the scores (BestWire, March 5,
2003).

During 2002, the controversy surrounding credit-based insurance scoring
shifted--from whether or not such scores correlate to higher risk of
insurance losses to how to use the scores without being accused of
discrimination. Many states have held public discussions regarding the use of
insurance scores, which are gleaned from credit reports and don't refer to
age, race or any information considered as inappropriate factors in an
underwriting review (Best's Review, January 2003).

(By Marie Suszynski, associate editor, BestWeek: Marie.Suszynski@ambest.com)

Survey: Credit Scoring A Rate Factor

NU Online News Service, March 31, 9:40 a.m. EST—In a new online poll conducted by the Kansas insurance department, more than half of Kansans participating in the survey said credit scoring was a factor in their increased auto and homeowners insurance rates.

Among 524 individuals who have responded so far, 457 people, or nearly 90 percent, said their auto and homeowners insurance rates have gone up in the past year, and 269 respondents said they were told by agents credit scoring was a factor in their insurance premium hikes.

The poll also found that 194 respondents did not receive any explanation for rate changes, while 153 people indicated they did receive explanation from their agents after the inquiry.

"We know that some Kansans are seeing rate increases, while others are seeing decreases because of credit scoring," said Kansas Insurance Commissioner Sandy Praeger, who organized the online survey. Ms. Praeger said she supports legislation that would allow her office to regulate the practice of credit scoring by insurers.

"Right now, there's no regulatory authority over this practice, and Kansas consumers deserve to know how their rates are determined. We need a clear picture of these trends so that legislators can understand how credit scoring is affecting real people, and then adopt appropriate regulatory legislation," Ms. Praeger said.

"This survey should shine some much-needed light on the matter."

Full results from the Kansas Insurance Department's online survey can be found at www.ksinsurance.org/creditscoring/credit_results.php

Kansas Governor Expected to Sign Insurance-Scoring Bill

TOPEKA, Kan. April 08 (BestWire) - The Kansas Legislature has passed a new credit-based insurance scoring act that allows insurers to use credit ratings in underwriting, but the bill leaves out a recommendation from the National Conference of Insurance Legislators.

House Bill 2071 has been approved by the House and the Senate and is expected to be signed by Gov. Kathleen Sebelius, said Jeff Brewer, spokesman for the National Association of Independent Insurers.

Under the bill, insurers would be prohibited from taking adverse action, denying or refusing to quote or renew a policy solely on the basis of credit information, Brewer said. Rather, insurers would be required to treat no credit history as a neutral factor or exclude it as a factor.

Although those provisions follow NCOIL's recommendations to deal with a "no hit," or a situation in which there's no credit history, the bill leaves out a third option. In addition to treating a "no-hit" as a neutral factor or by excluding it as a factor, NCOIL said insurers also could use it in underwriting or rating if they can demonstrate to the insurance commissioner that the "no-hit" carries a certain amount of risk, Brewer said.

The bill would also give policyholders the right to request that their scores be rerun once a year, but the information can only be used to lower the premium. Insurers also would be required to rerun scores at least every three years, depending on their underwriting process, and would be permitted to use the information to increase or decrease rates.

In addition, H.B. 2071 requires state Insurance Commissioner Sandy Praeger to report to the Legislature by Jan. 26, 2005, on the use of credit and the implementation of the act, Brewer said. There was an attempt to amend the bill to require a more extensive study by the commissioner, but the amendment was removed, he said. It would have required collecting information on race and income, which is information insurers don't collect.

"As an overall approach, this is workable," Brewer said, noting that the bill recognizes the value of insurance scoring as an underwriting and rating tool and protects scoring models as trade secrets.

Kansas had been facing a Senate bill that would have prohibited insurance scoring in renewals and as the sole basis for underwriting and rating (BestWire, March 10, 2003).

Senate Bill 144, which passed in the Senate and established how often insurers should run a credit rating, was rolled into House Bill 2071.

Credit-based insurance scoring is being discussed in several states. So far, Maryland has the strictest law, banning its use entirely in connection with homeowners insurance (BestWire, March 5, 2003).
(By Marie Suszynski, associate editor, BestWeek: Marie.Suszynski@ambest.com) BN-NJ-04-08-2003 1451 ET #