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Insurers Applaud Legislators’ Restraint in Considering Proposed Ban on Use of Credit Information

Olympia, WA (Feb. 5, 2008) – Three insurance industry advocacy organizations today applauded the members of the House Committee on Insurance, Financial Services & Consumer Protection for showing restraint on a bill to ban insurer use of credit in rating. HB 2802 was given a hearing on January 30, 2008. Following testimony, the Committee decided to hold the bill.

The three insurer trade organizations are the Property Casualty Insurance Association of America (PCI), the National Association of Mutual Insurance Companies (NAMIC) and the American Insurance Association (AIA). These associations represent more than 90 percent of the insurers offering property/casualty insurance in Washington.

“HB 2802 is unnecessary. Washington enacted one of the nation’s first laws restricting insurers’ use of credit information in 2002,” said Kenton Brine, PCI, NW regional manager. “Since then, the Legislature has approved another law and the state insurance commissioner has issued two rulemakings and a technical assistance advisory. Insurers’ use of credit information has been thoroughly debated and regulated in Washington. We need to allow the current statutes and regulations to work.”

National and state studies not only show a strong correlation between credit history and insurance risk, but also estimate that as many as 60-70 percent of consumers are paying less for their home or auto insurance because of insurers' use of credit scores in setting rates.

“Credit-based insurance scoring is a proven rating and underwriting tool used to assist insurance carriers in providing consumers with what they need and desire - rates that accurately reflect their personal risk of loss exposure,” said Christian Rataj, NAMIC's western states affairs manager. “A 2007 study on the correlation between credit scores and insurance claim filing practices by the Federal Trade Commission (FTC) concluded that credit-based insurance scoring is a reliable, equitable and effective predictor of the frequency and severity of claims filed by consumers. Consumers pay fair and appropriate rates when insurers can identify who is more likely to file a claim and the economic scope of said claim.”

“Consumers are the winners when they pay lower rates that fairly reflect their risk of loss. Insurance companies have been able to offer a wider range of products since they have been able to predict claiming behavior through insurance scores,” said Steve Suchil, AIA assistant vice president, state affairs. “Use of this information has enhanced competition in the marketplace and studies have verified the usefulness and positive effect to consumers. This tool gives consumers more choices and lower costs.”

Another sign that consumers are increasingly accepting of insurance credit scoring is that in the only two states where a ban on insurance credit scoring has come to a vote, ban proposals have been defeated by citizens or the Legislature. In 2006, Oregon voters rejected a credit scoring ban initiative, Measure 42, by a 2-1 margin. Last week, lawmakers in the Colorado House of Representatives voted down a proposed bill to ban insurance credit scoring.

PCI, NAMIC, and AIA vowed to continue to monitor HB 2802 and will oppose the measure if it is heard again.

For further information, contact
Nancy Grover
Director - Media Relations
(202) 628-1558 Tel
(202) 628-1601 Fax
ngrover@namic.org

Posted: Tuesday, February 05, 2008 12:00:00 AM. Modified: Thursday, February 28, 2008 2:26:37 PM.

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