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NAMIC Analyzes Credit-Based Insurance Scoring Laws

INDIANAPOLIS (Oct. 11, 2004)--Only two states-Pennsylvania and Vermont-have yet to enact laws or adopt regulation governing the use of credit-based insurance scoring, according to a just-completed analysis by the National Association of Mutual Insurance Companies (NAMIC) released here today.

While the laws and regulations vary considerably from state to state, they all generally establish restrictions or mandate procedures that insurers must follow if they wish to use credit-based insurance scores as an underwriting and rating tool.

"The majority of state laws and regulations addressing insurance scoring pertain to five key provisions contained in the insurance scoring model law developed by the National Conference of Insurance Legislators (NCOIL)" said NAMIC State Affairs Information Manager, Ken Marshall. "NAMIC advocates that states use the NCOIL model and was instrumental in its development."

The NCOIL model:

• Prohibits uses of certain negative credit factors;
• Imposes a duty to notify policyholders and applicants that credit history information will be used;
• Imposes a duty to notify policyholders or applicants about adverse decisions based on credit history information;
• Imposes a duty to establish dispute resolution mechanisms to reevaluate scores based on disputed information; and
• Imposes state filing and approval requirements.

NAMIC identified 27 states that have passed laws or adopted regulatory provisions patterned after these five key NCOIL insurance scoring provisions.

NAMIC also identified five states-Georgia, Hawaii, Maryland, Oregon, and Utah-that have approved some type of prohibition on the use of credit history information. Most of these prohibitions apply exclusively to automobile insurance.

NAMIC's complete analysis of credit-based insurance scoring laws can be found on NAMIC Online.

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For further information contact:
Robert Detlefsen at rdetlefsen@namic.org
or (317) 875-5250