Several Midwestern Legislatures Revisit Scoring Debate

The issue of credit-based insurance scoring is being revisited in many Midwestern states that considered legislation or regulations on the subject in previous years.

“This is one of the hottest legislative issue in 2003 for not only the Midwest, but across the country,” Laura Kotelman, counsel for the National Association of Independent Insurers (NAII), said. “Bills ranging from complete bans on the use of this highly predictive tool to a wide range of restrictions on its use in underwriting and rating have been filed in seven Midwestern states.”

Illinois, Indiana, Kansas, Minnesota, Missouri, Nebraska and North Dakota have legislation before lawmakers this year.

Each of these states with the exception of North Dakota, which was not in session, and Nebraska considered insurance scoring bills last year. Of the states considering legislation, Kansas, Minnesota and Missouri were the only Midwestern states to enact bills. Kansas enacted a study bill while Minnesota and Missouri passed hard-fought compromise legislation that attempted to strike a balance between consumer protections and insurer use of such scores.

“Although the insurance industry has made great strides to communicate more effectively with consumers, agents and public policymakers about the use of credit information in underwriting and rating, there remain some staunch opponents to this tool. However, we are confident that insurance scoring will continue to grow in acceptance, as have other new rating and underwriting factors,” Ann Weber, counsel for NAII, remarked.

A new development in the insurance scoring debate this year is the model bill developed this past fall by the National Conference of Insurance Legislators (NCOIL). Versions of the model have been introduced in Illinois, Indiana, Nebraska and North Dakota. “The NCOIL model, while not perfect, is positive in that it addresses the concerns of the producer community, and does not artificially impede insurers’ ability to use this accurate and cost-effective underwriting resource,” Robert Hurns, counsel for NAII, remarked. “It embodies solid consumer protections while, at the same time, preserving companies’ ability to use this important underwriting and rating measure.”

Illinois is currently considering two bills in the House. House Bill 502 would ban the use of insurance scores and House Bill 1640 is based on the NCOIL model. With the current amendments on HB 1640, NAII is supporting the bill.

A total of seven bills have been introduced in Indiana. House Bill 1213, which prohibits companies from using credit data for underwriting or pricing if a policyholder had continuous coverage and no claim loss or moving violations in the preceding two-year period, passed the House and is being considered in a Senate committee. Senate Bill 178, amended to mirror the NCOIL model, recently passed the Senate Insurance and Financial Institutions Committee and is awaiting consideration in the full Senate. Last year Indiana had two bills that passed in both chambers, but lawmakers were unable to reach a compromise, and the bills subsequently died.

The Kansas Senate has two bills before it this session. Senate Bill 144 is the insurance commissioner’s bill. It is a combination of the recommendations from the task force study called for by the Legislature last year and the NCOIL model. It prohibits the use of credit information as the sole basis for underwriting and rating personal lines. NAII is supportive of this bill with some modifications. Senate Bill 176 prohibits the use of credit as a sole basis for underwriting and rating and its consideration in the renewal of insurance.

In Minnesota, the industry is working with the agents to amend the Insurance Fair Information Reporting Act. House File 76 would allow agents or companies to run a potential policyholder’s insurance score with verbal permission and then get the written authorization before finalizing the policy.

Last year Missouri enacted legislation addressing insurance scoring. House Bill 259, which is more restrictive than the current law is not expected to advance in the Legislature.

The Nebraska Banking, Commerce and Insurance Committee approved the NAII supported LB 487, which is based on the NCOIL model. Legislation (LB 693) that would have banned insurance scoring died in committee.

NAII was successful in amending North Dakota’s insurance scoring legislation (HB 1260) to protect consumers from unfair use of such scores, while allowing companies to continue to use this underwriting tool. The bill is based on the NCOIL model and is being supported by NAII. Other insurance scoring legislation, House Bill 1290 died in committee.