INSURERS GET TEMPORARY STOP TO RELEASE OF INSURANCE-SCORING INFORMATION IN TEXAS

Revised: 09/22/2006

INSURERS GET TEMPORARY STOP TO RELEASE OF INSURANCE-SCORING INFORMATION IN TEXAS

September 27, 2004

AUSTIN, Texas (BestWire) - Insurers have sued to block the release of confidential information related to the industry's use of credit-based insurance scoring that was submitted to the Texas Department of Insurance for use in a study.

Earlier this year, the industry began complying with the insurance department's request for data for the study, which was called for in a new state law passed in 2003.

"The law requiring the study also says the identity of the companies and consumers used in the study are to be confidential," said Donald Hanson, regional manager and counsel with the Property Casualty Insurers Association of America. "It's pretty clear. It actually uses the word 'confidential.'" But the Texas department received a request form the Center for Economic Justice to make public all communications between the department and insurers. The department asked the state attorney general for ruling, and the attorney general ruled the information could be made public.

PCI, the American Insurance Association and the National Association of Mutual Insurance Cos. filed a lawsuit and got a judge to issue a temporary restraining order to block the release of the information. A hearing on the restraining order is expected in early October. The department couldn't comment because it was named in the lawsuit along with the attorney general.

The attorney general ruled that information given to the department, including the names of companies, was to be confidential in the final report, which is due in January, but in the meantime could be made public, Hanson said. "That didn't make sense to us. The argument would be that the data the companies are turning over should be public until it's in the study. That is horrible."

The confidential and proprietary information includes identities of insurers participating in the study and data elements used by those insurers in their underwriting and credit-based insurance scoring, Hanson said. "Those data elements are somewhat unique to those companies. Even if you remove the company name and you reveal the data element, you could identify the company."

The insurance industry didn't have the chance to present its case when the Texas department and the attorney general were going back and forth on this matter, said David Snyder, vice president and assistant general counsel with the AIA. "Our suit is presenting issues that were not presented between TDI and the attorney general, and we want the court to review all the issues, keeping in mind importance of proprietary information."

Snyder made clear this is an entirely different matter from the industry fighting a Missouri-led insurance-scoring study this year, because state law called for this study, which wasn't the case in Missouri.

The Texas attorney general's reading of state law could also endanger the privacy of consumers, said PCI's Hanson. The insurance department has data on about 2 million consumers as part of this study, and it needed a broad spectrum of consumer data to be sure the study is valid and includes a look at the margins, to be sure there are no "outliers" and that the industry's practices are valid, he said.

"The legislature, regulator and industry all understood that in order to have an open dialogue between the executive branch and industry over this practice, there needed to be some level of confidentiality so the government could satisfy itself that nothing bad was going on," Hanson said. "That understanding is still in place. The problem is when the AG was brought in. He may have looked at this issue in somewhat of a vacuum and looked at this law in a strained manner."

(By Dennis Kelly, senior associate editor, BestWeek: Dennis.Kelly@ambest.com) Copyright 2004 A.M. Best Company, Inc.

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