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Auto Insurers Defend Use of Credit Scores

Posted on 26 Oct 2010

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The National Association of Insurance Commissioners continues to probe car insurance companies about their use of consumer credit scores to determine policy rates, and the companies aren't happy about it.

At a public hearing with the NAIC's Property and Casualty Insurance Committee on Sept. 30 in Kansas City, Mo., insurance carriers defended their use credit scores to asses risk and opposed filling out surveys that would show, in addition to credit scores, how they weigh all factors like age and gender.

The proposed survey is the next step in a yearlong debate among association members about whether auto insurance companies' use of consumer credit scores is fair.

A downturn economy with more people out of work has made the issue even more relevant for association members.
Each state regulates how auto insurance companies can use credit scores. Louisiana, along with 26 other states, uses a National Conference of Insurance

Legislators model that allows the use of credit scores to determine policy rates.
Jim Donelon , Louisiana commissioner of insurance, said he doesn't see anything wrong with the practice. He sent a representative of his office to the committee meeting in September.

"If we banned the use, as has been tried legislatively in Washington and Michigan, then those with good credit scores will pay more and those with bad credit will pay less," he said. "Insurance is about spreading risk. Unlike age, which people can't control, driving records are determined by your own personal activity and your insurance score is determined by your own protection or failure to protect your credit."

The issue is expected to come up again this week during the NAIC conference in Florida. NAIC members are expected to decide whether to move forward with pushing the survey, which insurance carriers call exhaustive and unnecessary.