INDIANAPOLIS (Jan. 31, 2008) – Wisconsin’s ranking as one of the lowest-paying states for auto and homeowners’ insurance would be threatened if legislation passed by the Senate is adopted, according to the National Association of Mutual Insurance Companies (NAMIC). Lawmakers in that chamber today passed a bill that would prohibit insurers from using credit-based insurance scoring for underwriting.
Senate Bill 259 would forbid insurers from considering information in an individual’s credit report for issuing, renewing, or setting premiums for auto or homeowner’s insurance. It also prohibits a rating plan for motor vehicle or property insurance from using information in an individual’s credit report as a rating factor.
“Supporters of this legislation have clearly ignored the multitude of studies showing that credit-based insurance scoring is an objective and actuarially valid tool that enables insurers to better predict the likelihood of future claims and the cost of those claims,” said Robert Detlefsen, NAMIC’s vice president of public policy. “The practice is a major factor in holding down insurance rates for the great majority of Wisconsinites who have good credit histories.”
Last year, Wisconsin consumers paid among the lowest rates in the country for auto and homeowners’ insurance, Detlefsen explained. “The Federal Trade Commission last year issued a report affirming the strong correlation between credit information and risk of loss,” Detlefsen said. “Forcing insurance companies to discontinue the practice is a sure path to higher rates, as consumers who handle their finances responsibly would have to subsidize rates for the minority of customers with poor credit.”
Detlefsen, who testified against the bill before a Senate committee earlier this month, pledged to continue efforts to defeat the legislation. “Twenty-seven states have approved laws or regulations based on a model developed by the National Conference of Insurance Legislators that is fair, reasonable, and strikes a good balance between consumers’ rights and protecting the rights of insurers to use credit-based insurance scoring. NAMIC will work vigorously to persuade Wisconsin legislators to adopt such a measure.”
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Posted: Thursday, January 31, 2008 12:00:00 AM. Modified: Thursday, February 28, 2008 2:26:43 PM.
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