INDIANAPOLIS (March 30, 2007) — Legislation to ban the use of credit-based insurance scores to set auto and homeowners insurance rates in Delaware would ultimately hurt consumers, according to the National Association of Mutual Insurance Companies (NAMIC). The measure passed the Delaware Senate Insurance and Elections Committee, despite overwhelming evidence of the value of credit information for insurance underwriting.
“Research has consistently shown that credit scores are a valid indicator of an individual’s propensity for insurance losses,” said Paul Tetrault, NAMIC’s Northeast state affairs manager. “More importantly, using credit information enhances competition in the insurance marketplace and helps lower costs for most drivers.”
The legislation, S-31, would prohibit the practice of credit-based insurance scoring in setting premiums for auto and homeowners insurance in Delaware, and in denying applications for such insurance. It now goes to the full Senate, where similar legislation last year was amended to allow the use of credit on new policies, but prohibited the use of credit for rating or underwriting on existing business. The House never considered the compromise.
The current measure has the strong support of Delaware Insurance Commissioner Matt Denn, who has said he believes the use of credit information by insurers is unfair and unwarranted.
“Unfortunately, those who support this legislation don’t see that the use of credit information along with a range of other factors in underwriting promotes appropriate risk allocation and competition,” Tetrault said. “Hopefully, this misperception will be offset by those who have a better understanding of the detrimental ramifications of prohibiting the use of an effective underwriting tool.”
For further information, contact
(202) 628-1558 Tel
(202) 628-1601 Fax
Posted: Friday, March 30, 2007 12:00:00 AM. Modified: Friday, March 30, 2007 2:53:06 PM.
317.875.5250 - Indianapolis | 202.628.1558 - Washington, D.C.