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Credit Freezes Without Exemptions Could Lead to Higher Rates and Increased Identity Theft for Consumers, NAMIC Tells FTC

WASHINGTON (Feb. 26, 2008) – The National Association of Mutual Insurance Companies (NAMIC) today stressed the importance of quick access to consumers’ credit information as a means of holding down insurance rates. In comments to the Federal Trade Commission, NAMIC said imposing credit freezes without sufficient exemptions would result in higher costs to insurers, with consumers bearing the brunt.

The comments came in response to a request by the FTC, as it assesses the impact and effectiveness of credit freeze laws. The FTC has undertaken the action as the President’s Identity Theft Task Force considers ways to prevent identity theft.

“Accurate and timely access to the information in credit report databases is essential to ensure that insurance consumers are accurately rated and properly underwritten,” said Carl Parks, NAMIC’s senior vice president for government affairs. “Limiting access to credit reports could significantly increase the cost of insurance investigative and risk-management operations, decrease the speed of operations, and potentially expose gaps in records that would open the door to increased fraud.”

In its comments, NAMIC said credit reports provide insurers with an expedient, cost effective method for obtaining financial and other personal information necessary to underwrite and service property/casualty coverage.

The association stressed the importance of providing exemptions from credit freeze legislation and regulations for access to files for consumers with a pre-existing consumer relationship and for purposes permitted or authorized by the Fair Credit Reporting Act. NAMIC urged inclusion of specific language authorizing access for use in setting or adjusting a rate, issuing or underwriting a policy, adjusting a claim, or servicing a policy for underwriting for property/casualty insurance purposes.

“It is also important that policymakers recognize the important distinction between enacting legislation or regulations permitting freezes on ‘credit reports’ and ‘consumer reports,’” Parks said.

Legislation specifying “credit report” would freeze only the actual credit report, Parks explained, thus safeguarding consumers from third parties accessing their identities. Legislation that uses the “consumer report” definition would allow the freeze to also apply to every other report used by insurers for underwriting and fraud prevention. Laws that impose broad prohibitions on access to credit reports give rise to unintended consequences.

“Simply allowing consumers to freeze credit reports without inclusion of proper exemptions could have the effect of hindering the efficient operation of our nation’s financial services economy and, ironically, could increase fraud and identity theft,” Parks said.

NAMIC urged federal and state policymakers to continue to work together to establish a consistent national standard that permits proper exceptions and appropriately balances the desire for privacy and security with the need for access to timely and accurate information.

For further information, contact
Nancy Grover
Director - Media Relations
(202) 628-1558 Tel
(202) 628-1601 Fax

Posted: Tuesday, February 26, 2008 12:00:00 AM. Modified: Thursday, February 28, 2008 2:26:02 PM.

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