NCOIL Insurance Credit Scoring Model Has Regulation Under Control, New Resolution Asserts

The National Conference of Insurance Legislators (“NCOIL”) issued the press release below regarding its adoption this week of a resolution reiterating the success of its 2002 Model Act Regarding Use of Consumer Credit Information in Personal Insurance and opposing two pending federal bills:  H.R. 5633, the Nondiscriminatory Use of Consumer Reports and Consumer Information Act of 2008, and H.R. 6062, the Personal Lines of Insurance Fairness Act of 2008 that NCOIL contends would intrude on state-level efforts to oversee insurance scoring.

The July 13 resolution was adopted during NCOIL’s recently-concluded Summer, 2008 meeting in New York. 

To view a report on the recent U.S. House Subcommittee on Oversight & Investigations hearing entitled “The Impact of Credit-Based Insurance Scoring on the Availability and Affordability of Insurance,” click here.

An outline of NCOIL’s 2002 Model Act on the Use of Consumer Credit Information in Personal Insurance is reprinted below.

Should you have any questions or comments, please do not hesitate to contact this office.

 

NCOIL Insurance Scoring Model Has Regulation Under Control, New Resolution Asserts 

New York, New York, June 14, 2008—As Congress debates bills that would toss aside state efforts to regulate credit-based insurance scoring, the National Conference of Insurance Legislators (NCOIL) on July 13 adopted a Resolution Supporting State Regulation of the Use of Credit Information in Personal Insurance—which highlights the ongoing 26-state success of an NCOIL insurance scoring model act and opposes federal plans to usurp state prerogative. 

The resolution, adopted during the NCOIL Summer Meeting in New York City, recognizes the 2002 NCOIL model’s ability to protect consumers and promote competitive insurance markets, including provisions that assist the young, old, and those who suffer extraordinary life events.  Nearly all states, the resolution notes, regulate credit-based scoring.  The NCOIL resolution says also that H.R. 5633, the Nondiscriminatory Use of Consumer Reports and Consumer Information Act of 2008 and H.R. 6062, the Personal Lines of Insurance Fairness Act of 2008, would intrude on state-level efforts to oversee insurance scoring.

The NCOIL resolution opposes any federal legislation that would disregard legislatures’ ability to determine what is best for their individual states and would infringe on state authority to regulate the business of insurance.  Proponents of the pending bills say they would remedy concerns that insurance scores serve as “stand-ins” for race, income, or ethnicity.  

According to NCOIL Secretary Rep. George Keiser (ND), sponsor of the resolution, “The NCOIL model successfully balances consumer and other interests and makes it clear, in our opinion, that federal regulation is unnecessary.  Those in Congress who worry about the fairness of insurance scoring should read the NCOIL model law and look at what NCOIL-based states have accomplished—since most states resolved this issue, in a timely way, several years ago.” 

In general, the NCOIL Model Act Regarding Use of Credit Information in Personal Insurance prohibits credit experience from being the sole factor influencing a personal-lines underwriting or rating decision and provides for use of updated credit information, among other things.

Adoption of the NCOIL resolution followed Rep. Keiser’s May 21 testimony at a U.S. House Subcommittee on Oversight & Investigations hearing entitled The Impact of Credit-Based Insurance Scoring on the Availability and Affordability of Insurance.

The NCOIL Executive Committee vote on July 13 followed Property-Casualty Insurance Committee adoption of the resolution on July 11.  The NCOIL Summer Meeting was held at the Marriott Marquis in Times Square.

 

(From 2002)

NCOIL Adopts Insurance Scoring Model Act 

San Francisco, California, November 24, 2002-The National Conference of Insurance Legislators (NCOIL) adopted on November 22 a proposed Model Act Regarding Use of Consumer Credit Information in Personal Insurance, which would regulate how insurers could use consumer credit reports to underwrite and rate personal lines insurance risks.  The action, taken during the NCOIL Annual Meeting in San Francisco, California, comes as some 40 state legislatures prepare to consider insurance scoring legislation next session.  

The model, sponsored by Rep. Timothy Osmond (IL) and collectively endorsed by the property-casualty insurance industry and the agents (among others), was submitted as a substitute amendment to the proposed insurance scoring model introduced at the July NCOIL Summer Meeting.  In part, the adopted model would: 

·        Require an insurer to re-underwrite and re-rate an insured whose credit report was corrected

·        Require an insurer to notify an applicant for insurance that credit information would be used in underwriting and rating

·        Require an insurer to notify a consumer in the event of an adverse action based on credit information, including notification of up to four factors that were the primary influences on the adverse action

·        Indemnify insurance agents/brokers who obtained credit information and/or insurance scores according to an insurer’s procedures and according to applicable law and regulation

·        Restrict a consumer reporting agency’s ability to provide or sell information submitted in conjunction with an insurance inquiry

·        Require an insurer to file its scoring models with the Department of Insurance and have them considered trade secret

In a 20-5 vote, the NCOIL Property-Casualty Insurance Committee adopted the model after approving a handful of revisions reached by Committee consensus.  Legislators then referred the model to the Executive Committee, which later that day adopted it via voice vote. 

According to Rep. Osmond, who also sponsored the earlier proposal considered in July:

NCOIL’s decisive adoption of this model will allow states to establish uniformity regarding how insurers can use credit information to determine eligibility for insurance coverage, as well as how they can use it to make rating and renewal decisions.  This truly is a historic opportunity for states to protect consumers and support a free market.

P-C Insurance Committee consideration of a Model Act Regarding Use of Consumer Credit Information in Personal Insurance followed a November 21 hearing from 3:00 to 5:30 p.m. in which nearly a dozen insurance industry, agent, regulatory, consumer, credit modeling, and credit-reporting agency experts testified to specific provisions of the proposed model act.  The hearing preceded a special 5:30 to 6:30 p.m. Committee meeting to discuss the issue and the Committee’s regularly scheduled 7:30 to 10:00 a.m. meeting the next day.

Several amendments to the July proposal, again sponsored by Rep. Osmond, were withdrawn in favor of considering the substitute amendment.  Committee Chair Rep. Craig Eiland (TX) also submitted amendments to the earlier model but, rather than consider them in Committee, encouraged legislators to review his proposals in their individual state houses.

 

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