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AUSTIN, Texas July 01, 2004 (BestWire) - A consumer advocate said
insurers' use of credit-based insurance scoring violates Michigan law,
and the industry is using the underwriting tool because the prior
commissioner was industry-friendly and allowed this violation.
Birny Birnbaum, executive director of the Center for Economic Justice,
blasted automobile and homeowners insurers in Michigan for being
dishonest about current Gov. Jennifer Granholm's proposed ban on
credit-based insurance scoring.
His comments came a day after he criticized insurance trade associations
for trying to "intimidate" regulators into pulling out of a Missouri-led
multistate study on credit-based insurance scoring. He also took a swipe
at insurance trades for hiring attorney Nat Shapo, the former Illinois
insurance commissioner, to mount a legal challenge to the study.
At the same time Birnbaum was releasing his July 1 statement on
Michigan, the Property Casualty Insurers Association of America was
holding a conference call to talk about Birnbaum's first letter and
PCI's continued effort to get regulators to withdraw from the multistate
study.
Regulators in Missouri, Oregon, Washington, Nevada, Maryland, Montana,
Indiana and Louisiana, continue to ask insurers to submit data for the
study by Aug. 20, asserting that they have the legal authority to make
this data call.
The insurance trades acknowledge regulators have authority to make data
calls, "but it's not unbridled," said Robert Zeman, a PCI senior vice
president. PCI and the National Association of Mutual Insurance
Companies hired Shapo to make the legal challenge to the study. The
trades contend the data call isn't being done with an eye toward gauging
compliance with market-conduct laws.
Litigation, though not desired, is still an option for the trades and
the insurers they represent, Zeman said, adding that if the legal option
is to be exercised, it would have to happen before Aug. 20. "We cannot
and will not wait until that date to take action," he said.
The multistate study is "a fishing expedition," Zeman said, adding that
the data call shouldn't be a "broad-based, theoretical academic study of
what the law should look like." He noted a study on the use of credit
information already is under way at the Federal Trade Commission.
Zeman said Birnbaum missed the point of Shapo's legal challenge letter,
when Birnbaum accused the trades of engaging in misinformation about the
study in a desperate attempt to hang on to credit-based insurance
scoring.
Birnbaum also urged state regulators not to back down in their pursuit
of the multistate study and said he was concerned that other regulators,
watching this battle from a distance, could be intimidated by the
industry (BestWire, June 30, 2004).
While Zeman was discussing Birnbaum's remarks on the Missouri-led study,
he had yet to see Birnbaum's message on Michigan, where insurers are
battling the governor and insurance commissioner over a proposed rule to
ban credit-based insurance scoring for homeowners and auto policies.
Birnbaum was joined in his smack at the industry by Brian Imus,
legislative advocate for the Public Interest Research Group in Michigan.
"Insurers' use of credit scoring is clearly prohibited by current
Michigan law," Birnbaum said. "It was because the prior
industry-friendly insurance commissioner and governor let insurers
violate the law that insurers are using credit scoring now."
Birnbaum said "the financial and political power of the insurance
industry is fearsome," and he commended Granholm's "political courage in
standing up to the industry." Granholm appointed Linda Watters insurance
commissioner last year to succeed Frank Fitzgerald.
The Michigan Essential Insurance Act states that insurers may use
certain rating factors, such as credit scores, if the rating factor
"reflects reasonably anticipated reductions in losses or expenses,"
Birnbaum said. "Credit scoring doesn't result in lower claims or
expenses and, therefore, doesn't qualify."
(By Dennis Kelly, senior associate editor, BestWeek:
Dennis.Kelly@ambest.com) BN-NJ-07-01-2004 1413 ET # |