Credit Scores: Credit-Based Insurance Scores Page: 4 of 6
The following text was automatically extracted from the image on this page using optical character recognition software:
Congress has continued to monitor the effectiveness of FCRA with interest peaking
during the first session of the 108th Congress as portions of FCRA were set to expire at
the end of 2003. Following a wide-ranging series of hearings and two markups, the
House Financial Services Committee reported H.R.2622 amending the Fair Credit
Reporting Act on July 25, 2003. While the FCRA's primary focus is on the regulation of
credit information, the usage of this information, particularly insurance scores, by insurers
drew congressional interest. Congressman Gutierrez previously introduced H.R.1473 to
specifically regulate insurers' use of credit information and he offered an amendment at
the subcommittee markup of H.R.2622 calling for a study of insurer usage of credit
information. This amendment was accepted and included in the bill as reported from the
full committee. The Senate held hearings and passed a bill amending the FCRA, S. 1753,
after the House. This bill also included the requirement for a slightly different study on
the usage of credit information in insurance. The conference committee made further
slight changes to the study requirement and it was included in the conference report as
passed and signed by the President (P.L. 108-159).
State Regulatory Aspects
Unlike banks and other financial institutions that are regulated primarily at the
federal level, insurers are regulated primarily at the state level.10 Most state insurance
laws prohibit unfair trade practices, and also require that insurance rates not be unfairly
discriminatory. Many states require prior approval of insurance premium rates, especially
those for personal lines such as automobile and homeowners insurance. State lawmakers
are beginning to turn their attention to the issue of insurers' using credit-based insurance
scores in making underwriting, marketing, and rating decisions. According to the
National Association of Mutual Insurance Companies (NAMIC), 48 states have taken
legislative or regulatory action addressing insurer use of credit history information."
Many of the state laws are following a model law12 recommended by the National
Conference of Insurance Legislators (NCOIL) and generally supported by insurers. The
law was described in congressional testimony13 as requiring "insurers:
" to notify an applicant for insurance if credit information will be used in
underwriting and rating;
" to notify a consumer in the event of an adverse action based on credit
information, including notification of factors that were the primary
influences on the adverse action;
" to re-underwrite and re-rate a policyholder whose credit report was
10 For additional information on the background of state regulation of insurance, see CRS Issue
Brief IB 10106, Insurance Regulation and Competition: Background and Issues, by Baird Webel.
" NAMIC On Line, "Laws Governing the Use of Credit-based Insurance Scoring," available at
[http://www.namic.org/reports/credithistory/credithistory.asp], visited Dec. 8, 2004.
12 The text of this model can be found at [http://www.ncoil.org/other/CreditScoringModel.doc].
13 Gregory V. Serio, "Testimony of the National Association of Insurance Commissioners," U.S.
Congress, House Committee on Financial Services, Subcommittee on Financial Institutions and
Consumer Credit, The Fair Credit Reporting Act: How it Functions for Consumers and the
Economy, 108th Cong., 1st sess., hearings, June 4, 2004, p. 5.
Here’s what’s next.
This report can be searched. Note: Results may vary based on the legibility of text within the document.
Tools / Downloads
Get a copy of this page or view the extracted text.
Citing and Sharing
Basic information for referencing this web page. We also provide extended guidance on usage rights, references, copying or embedding.
Reference the current page of this Report.
Credit Scores: Credit-Based Insurance Scores, report, January 19, 2005; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc817578/m1/4/: accessed January 18, 2019), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.