Fla. OIR Ponders Next Move On Credit Scoring

National Underwriter--February 20, 2009

BY PHIL GUSMAN

The Florida Office of Insurance Regulation (OIR) will review testimony on use of consumer credit information as an auto insurance rating factor, but has no timeline yet regarding when, or if, it will take action to curb the practice, a spokesman said.

The OIR subpoenaed five insurance companies-Allstate, GEICO, Nationwide, Progressive and State Farm-to a hearing this past Wednesday and questioned them on how they use credit information in their underwriting practices.

OIR spokesman Ed Domansky said Commissioner Kevin McCarty’s position on the use of credit scoring has been, as noted in documents on the OIR Web site, that the practice leads to an unintentional discriminatory effect on low-income individuals and minorities.

But although the commissioner has a position on the issue, Mr. Domansky said the purpose of holding a hearing on credit scoring was to give insurance companies the opportunity to provide details about how they use credit information, and to show that the use of such information does not adversely impact customers.

Comments made at the hearing will be reviewed, Mr. Domansky said, but no timeline has been set regarding a potential next step as regulators received considerable information from insurance companies and others and heard over six hours of testimony.

Meanwhile, in both the Florida House and Senate, bills have been introduced that would ban the use of credit information for underwriting purposes with respect to auto insurance.

Senator Ronda Storms, R-Valrico, introduced SB1524, and Rep. Priscilla Taylor, D-West Palm Beach, who is an insurance agent, introduced HB 683. Both bills would ban the use of credit, as well as education and occupation, as rating factors for auto insurers.

Mr. Domansky said the OIR is aware of the bills, and added that while the OIR is not a direct sponsor, the office and the commissioner could act in furtherance of the bills.

He said typically when the OIR and legislature are working on similar issues, they act independently, but on this issue, with each body aware of what the other is doing, there probably will be some level of communication.

However, given the new information provided by insurance companies at the hearing that the OIR has yet to fully review, Mr. Domansky stressed the OIR needs to remain fair and objective.

Gary Landry, vice president of the Florida Insurance Council, said he believes insurance companies showed during the hearing that 50-to-60 percent of the minority population would see premiums rise if credit was banned as a rating factor. This holds true, Mr. Landry said, despite arguments minorities are adversely affected by the use of credit information.

In addition, Mr. Landry said although concerns were voiced that the economic meltdown could hurt consumers’ credit, and therefore lead to increased insurance rates, insurance companies said at the hearing that they have seen no evidence of that.

Insurers also testified, Mr. Landry said, that they have procedures in place that allow them to account for life-changing, credit altering events beyond a consumer’s control.