Two Michigan lawmakers recently introduced federal legislation to prohibit auto insurers from using credit scores as an underwriting tool. The bill, H.R.6129, the Ban the Use of Credit Scores in Auto Insurance Act, was introduced by Democratic Reps. John Conyers and Hansen Clarke and referred to the House Financial Services Committee for consideration. It seems clear that introduction of this legislation in advance of the elections in November is purely for political purposes and we remain confident that we can prevent H.R. 6129 from becoming law in this Congress.
Although typically an issue more heavily debated in state legislatures, federal legislation to limit or ban the use of credit-based insurance scoring is hardly a new phenomenon – the previous four Congresses all had similar bills. Conyers and Clarke – and Rep. Bernie Thompson, D-Miss., an original cosponsor – clearly misunderstand the way in which property/casualty insurers make use of credit scores in their underwriting. Thanks in large part to the hard work that has been put in by NAMIC members to educate lawmakers in Washington, Chairman of the House Financial Services Committee Spencer Bauchus, R-Ala., - along with a majority of the financial services committee members - recognizes the importance of not restricting those underwriting factors that have been proven to help assess risk.
Credit-based insurance scores have been used by insurance company underwriters and actuaries for nearly two decades to more accurately assess risk and price coverage for automobile and homeowners’ insurance policies. Insurance scores that incorporate credit scores provide an objective, fair, and consistent tool that insurers use with other information to better predict the likelihood of future claims and the cost of those claims. Additionally, every empirical study has concluded that insurance scoring is neutral on its face with respect to race, ethnicity, and income, and is applied neutrally by insurers.
The federal government should not be interfering in regulating the state-approved underwriting practices of auto insurers. Since 1945, the McCarran-Ferguson Act has made the states the primary regulators of the property/casualty insurance industry. Allowing Congress to hand down restrictions on the underwriting factors available for use would go directly against decades of precedent and would only serve to frustrate a functioning regulatory system. Furthermore, almost every single state already has laws or regulations on the books pertaining to the use of credit scores in insurance underwriting.
Again, thanks to our sustained educational efforts over the years, the bill has not and will not receive broad support. We will ensure that this legislation is killed in its cradle and do not expect that it will move anywhere this Congress.
Contact: Jonathan Bergner
Federal Affairs Director