Alliance Disappointed in Score Class Action Ruling

The Alliance of American Insurers expressed disappointment with the Fifth Circuit Court of Appeals’ decision in DeHoyos v. Allstate Insurance Company, which was filed in Texas.

The case stems from the Texas-based plaintiffs’ allegations that Allstate uses credit-based insurance scoring to conceal racial discrimination against customers.

The court’s decision allows a nationwide class action lawsuit to proceed by finding that the federal McCarran-Ferguson Act does not prevent the application of the federal Fair Housing Act to state regulation of insurer use of credit information.

The Alliance disagrees with the Court’s conclusion that the Fair Housing Act does not interfere with state laws regulating insurance. The association said the Court ignored Texas laws prohibiting unfair discrimination by insurers and regulating insurers’ use of credit-based insurance scoring. The Court has also ignored the fact that insurer use of credit information is specifically allowed by the federal Fair Credit Reporting Act.

Insurers use credit scoring to measure risk of loss, and the correlation between credit score and insurance loss has been clearly proven. Insurers that consider credit-based insurance score in their underwriting and rating decisions do so in a consistent manner across all their policyholders. It would be impossible to determine race or ethnic group by insurance score – such information is never included in the underlying credit information used to calculate a credit-based insurance score.