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January 11, 2005, Insurance
Journal
Calling the practice discriminatory and unfair, Texas State Senator
Rodney Ellis of Houston announced he and Senators Gonzalo Barrientos of
Austin and Eliot Shapleigh of El Paso will file a bill that bans credit
scoring as a underwriting guideline for insurance.
Citing a recent study by
the Center for Economic Justice (CEJ), Ellis says credit scoring leads
to disproportionately higher premiums for minority and middle class
Texans. "Credit scoring is discriminatory," Ellis said, "Regardless of
whether you do a study on it or not, most right-thinking people have a
basic visceral notion that credit scoring is something that ought not be
used in determining what somebody's rate should be. "
Texas insurance
underwriters commonly use scores based on credit ratings to determine
how much to charge for insurance. The CEJ study concluded that this
practice does not demonstrate a link between credit risk and actual
claims.
"Being a month late on your
Chevron bill should not dictate how much you pay to insure your car or
yourself against damage or injury," said Senator Gonzalo Barrientos,
"And we all know credit scores are often rife with errors."
Last session, the insurance
reform omnibus bill that was passed in the House of Representatives
included a provision that disallowed insurance companies from using
credit scores as an underwriting guideline. But that provision was
removed during conference committee. In its place, the Legislature gave
power to the insurance commissioner to determine to what degree credit
scoring can be used as a guideline. Ellis wants to go a step further,
and make it illegal for credit scores to be used at all.
A study recently released
by the Texas Department of Insurance shows a correlation between credit
scores and claims. It also indicated that some minorities and
low-to-moderate income policyholders tend to have lower credit scores.
The Senate begins the 79th
legislative session Jan. 11, at noon. |