OIR PUBLIC HEARING ON THE USE OF CREDIT REPORTS AND CREDIT SCORES BY INSURERS

On Thursday, August 9, 2007, a representative from this office attended a public hearing on Proposed Rules 69O-125.005 and 69O-125.006, relating to the “Use of Credit Reports and Credit Scores by Insurers.” These Rules require the review and approval of the use of credit scores and the submission of specified information and verification that the methods and processes are accurate predictors of risk.  Further, the Rules provide standards to ensure that rates associated with the use of credit reports are not unfairly discriminatory.  For your review, we have attached copies of the Proposed Rules and the Hearing Agenda.

Steve Fredrickson, with the Office of Insurance Regulation (“OIR”), opened the meeting and admitted exhibits “A” through “J” into the record.  The exhibits included reports on credit scoring from the Federal Trade Commission, Maryland, Washington, Missouri, Florida, Texas, the Final Order in connection with the case of Florida Insurance Counsel v. OIR, issued December 29, 2006, and witness testimony from related hearings.
            
Public testimony was taken immediately following the admission of these exhibits.  The first presenter queried whether these Rules are intended to apply to commercial and workers’ compensation insurance policies.  Steve Parton, General Counsel with OIR responded that the Rules are intended to apply to automobile and personal homeowners’ policies and not workers’ compensation or commercial, but that the Rules may or may not apply to workers’ compensation and commercial policies.

Next, there was public testimony objecting to the proposed Rules on the grounds that they are vague, arbitrary and capricious, exceed the OIR’s statutory authority provided in § 626.9741, Florida Statutes, and that compliance is statistically impossible.  A representative of industry trade associations offered an alternative rule as part of the record that is intended to be less costly and accomplish the same goals as the proposed Rules.   Mr. Parton followed with a series of questions on the alternative rule with a focus on whether it ensures that there is not a disproportionate affect on minorities or the elderly.  He also questioned whether the credit scoring was useful for pricing in the non-standard market and if there were studies that indicated such.  There were not any such studies offered at the hearing.

Mr. Fredrickson concluded the hearing and indicated that the Department of Financial Services my offer another alternative rule to the OIR for their consideration.  The record will remain open for an additional ten (10) days to allow for any other written comments from the public.  Such comments should be forwarded to Mr. Fredrickson. 

The above information is intended to be a general summary of the events and activities that took place during the public hearing.  It is not intended to provide specific analysis and should not be relied upon for making individual business decisions that are specific in nature.

 

Should you have any questions or comments regarding this information, please feel free to contact this office.