Information from the Office of Insurance Regulation re Implementation of Rule Prohibiting Discriminatory Use of Credit Scores by Insurers 5/23/06

Please see the Office of Insurance Regulation’s press release below regarding implementation of a rule prohibiting discriminatory use of credit scores by insurers. Please contact this office with any questions or concerns you may have.

Sincerely,

Katherine A. Scott

INSURANCE COMMISSIONER TO IMPLEMENT RULE TO PREVENT DISCRIMINATION IN PURCHASE OF INSURANCE

Florida Insurance Commissioner Kevin McCarty today officially notified all insurers operating in the state of stringent new rules regarding the use of credit scores. McCarty presented the rule recently to the Financial Services Commission (FSC) and it was unanimously adopted. It is being challenged in state court by various industry trade groups.

“Florida�s cultural and ethnic diversity is unparalleled, but unfortunately this is also an environment where credit scoring often victimizes innocent consumers,” said McCarty. “Many religious and ethnic minorities often have limited or no credit history by choice or because they are beginning to climb the economic ladder. This should bear no relationship to what they pay for insurance or to what coverage is available to them.”

One public study found that one in four credit reports contains errors or omissions serious enough to disqualify consumers from purchasing a home, a car or getting a job. And, in recent years, a national insurance company paid a multi-million dollar fine to settle state charges that it used negative credit information to deny or discourage applicants from obtaining automobile coverage.

The new rule will require all insurers making filings to the Office of Insurance Regulation to provide information proving the use of credit information does not disproportionately affect persons of any race, color, religion, gender, age or place of residence. The filings must also include a complete description of the methodology utilized when using credit information, they must contain data showing what impact having little or no credit history would have on policyholders and also certification that the insurer will correct any errors in premiums charged to Floridians.

The rule requires compliance with the Fair Credit Reporting Act, it mandates a biannual review of credit information when requested by the insured and the rule requires insurers to establish procedures for appeal by applicants whose credit was negatively impacted by divorce, death of a spouse or temporary unemployment.

The FSC authorized the Office to begin implementing the rule, citing continued delays due to litigation and ongoing potential harm to Floridians due to the use of credit information by insurers. The Florida Insurance Council, the American Insurance Association, the Property and Casualty Insurers of America and the National Association of Mutual Insurance Companies are challenging the rule in circuit court in Leon County.

The Informational Memorandum sent to all affected insurance companies can be viewed at http://www.floir.com/Memoranda/OIR-06-10M.pdf.

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