Posted on 20 Feb 2009
Property/casualty insurers took aim at a Connecticut bill that would ban the use of credit-based insurance scoring and limit the use of territorial rating at a public legislative hearing.
Industry representatives strongly opposed H.B. 6444 and a companion bill, H.B. 6446, an anti-steering bill that would place limits on insurers who offer guarantees on automobile body repairs completed in shops recommended by insurers.
"The net effect of H.B. 6444 would be to make insurance underwriting and rating less accurate and result in lower-risk consumers subsidizing higher-risk consumers. Consumers that pose higher risk should pay more for insurance. This bill turns that notion on its head," Paul Magaril, regional manager and counsel for the Property Casualty Insurers Association of America testified.
Paul Tetrault, Northeast state affairs manager for the National Association of Mutual Insurance Companies, reiterated the industry position that the use of credit-based insurance scores is a valid and accurate predictor of claims and losses. "Insurers using insurance scores are able to extend coverage offers and provide lower prices to more applicants and policyholders than they would otherwise," he said in a statement.
Magaril said H.B. 6446 would hamstring insurance companies' ability to offer lifetime warranties on repair work that may be made use of at facilities across the country. "Only one group would benefit from this bill – auto repair shops that would be protected from competition," he said.
Tetrault and Magaril gave a better reception to H.B. 6280, which would extend the sunset date for the filing of personal risk insurance rates by two years. This legislation would allow the state to continue to permit flex-rating for personal risk insurance rate filings. Currently, insurers may implement annual changes of plus or minus 6% in personal auto and homeowners insurance rates without prior regulatory approval.
"Analysis of the latest information available shows that the law is achieving what lawmakers intended by moderating premium costs and contributing to a vibrant, competitive market," Magaril testified.
Moves to restrict the use of consumer credit data in insurance scoring have received a boost from increasing consumer concerns about the economy over foreclosures and job losses. In December, the U.S. Federal Trade Commission ordered nine of the largest homeowners insurers, representing 60% of the U.S. market, to submit information on how consumer credit records are used in their underwriting and rate-setting models.
In 2007, the top five writers of private-passenger auto insurance in Connecticut, according to A.M. Best Co. state/line product information based on direct premiums written, were: Allstate Insurance Group, with a 13.3% market share; Berkshire Hathaway Insurance Group, 10.8%; Progressive Insurance Group, 8.7%; Travelers Insurance Cos., 8.3%; and Liberty Mutual Insurance Cos., with 5.9%.