[In November 2003, this letter was sent to over 60 Congressmen, each of which sits on the House Committee on Financial Services]

Dear Representative XXXXX,


The insurance industry, in conjunction with Fair Isaac and Choice Point, has sold legislators across the country on the concept that using credit to underwrite and price insurance products is “good for the consumer.”

The industry, as proof that using credit is good, says, “There is a correlation between a consumers use of credit and the consumers potential for future losses.” The industry continues to maintain that a huge percentage of their customers get a rate reduction because of the use of credit.

State legislators across the country, under the guise of “protecting consumers” have passed bill after bill they claim restricts the use of credit data in insurance. The National Conference of Insurance Legislators (NCOIL) even wrote a model insurance bill that continued to allow the use of credit in insurance while still claiming it restricted the industry’s use. Monte Ward, Vice President of Federal Affairs for the National Association of Mutual Insurance Companies recently said, “[The NCOIL model] strikes an appropriate balance between the needs of the consumers and insurers.”

But …

If your credit history is an accurate predictor of future losses, as stated by the industry, why can a person’s credit score fluctuate dramatically over, as little as, a 30-day period? It does happen and no one has taken the time to answer the question.

If there is a “correlation” between a credit score and future losses, why, after many years, isn’t there any definitive proof? How much longer will the industry be allowed to use the word “correlation” instead of the word “proof”?

If you were to run a credit report on yourself, would it be accurate? What percentage of credit reports are found to be inaccurate? What is the procedure for correcting mistakes? How long does it take? Having your staff actually run a credit report and try to correct an entry would be a good exercise {asking the insurance industry would not be if you sought the truth).

If the industry, in the process of quoting or issuing a policy, runs a credit report and the consumer does not get the best possible score, they are required (by laws in many states) to show what caused the lower score. Does the consumer learn anything if one or more of the reasons are positive (i.e. Fair Isaac’s #002- No recent delinquency)?

Is the use of credit data in insurance underwriting and pricing discriminatory? The National Association of Insurance Commissioners, in a “White Paper” several years ago, said YES. One, generalizing, could argue successfully that there is a correlation between income and credit scores.

And lastly, what is measured in the “proprietary” scoring model(s) used by the industry to judge consumers? Does the public know? Do any state legislators? Do any employees of a state Department of Insurance? The answer, at best, would be “Very few, if any, know.” Depending on the insurance company, there could be as few as nine and as many as 29 criteria measured by the scoring model. Does the model review the consumers skin color? His income? Her age? Does the scoring model lower a consumer’s score because of too many inquiries from insurance carriers (Fair Isaac and the industry will say “No” but my personal credit report says “Yes.”)?

The United Farmers Agents Association (UFAA) is a national, not for profit, professional association of independent contractor agents representing the Farmers Insurance Group of Companies. As a group, UFAA opposes the use of any form of credit in underwriting and rating insurance products. Unless or until the industry reveals the criteria used in their scoring models, consumers across America are subject to potential discriminatory practices. Unless or until the industry is forced to reveal the criteria used in the scoring models, consumers will have no ability to accurately identify and correct alleged problems with their credit.

We urge you to conduct a Federal study on the use of credit in insurance. We urge you to conduct the study with only minimal input from the insurance industry. We urge you to come to the aid of consumers across the nation.

Thank you

Ralph Buchanan
United Farmers Agents Association
President