Credit Scores: Credit-Based Insurance Scores Page: 5 of 6
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" to indemnify insurance agents/brokers who obtained credit information
and/or insurance scores according to an insurer's procedures and
according to applicable laws and regulations;
" to file its scoring models with the applicable state department of
insurance; such filings are deemed trade secrets."
Although described by a prominent consumer group as improving upon the previous
market practices, the NCOIL law is seen as far from the prohibition on use of credit scores
that some would prefer.14
State insurance regulators are also increasing their regulatory oversight over credit-
based insurance scores. In some states, the regulators have already addressed the issue,
but in an effort to develop a more unified national approach, most regulators are working
through their trade organization, the National Association of Insurance Commissioners
(NAIC). In March 2002, the NAIC appointed a credit scoring working group to focus on
the various regulatory issues related to the use of credit information in the insurance
underwriting and rating process. The working group has drafted documents to aid
insurance consumers, and to assist the regulators in clarifying the issues and
recommending a set of best practices. Two draft documents were cited in NAIC
congressional testimony5 and approved by the full NAIC shortly thereafter:
" Consumer Brochure: Understanding How Insurers Use Credit
Information: This is a question/answer brochure, addressing such matters
as the legality of an insurer's obtaining a credit report under FCRA
without permission, why and how insurers use credit information, and
how to improve one's insurance score.
" Credit-Based Insurance Scoring: Regulatory Options: This document
seeks to set forth the pros and cons of various regulation options,
including a ban on the use of credit history for rating purposes.
These two documents, however, did not complete the recommendations or policies
some hoped would emanate from the working group and the NAIC. A study on the
possible disparate impact of credit scoring was proposed. This proposed study, however,
provoked significant debate and opposition. The working group cancelled a previously
scheduled session at the regular NAIC summer national meeting that was held June 21-24,
2003.16 At the NAIC fall national meeting, held September 13-16, 2003, this study was
put off and it was suggested that concerned states should do studies of their own."
Indiana, Louisiana, Maryland, Missouri, Montana, Nevada, Oregon and Washington
14 See "Comments of Birny Birnbaum On Behalf of the Center for Economic Justice Before the
National Conference of Insurance Legislators," available at
[http://www.cej-online.org/ncoil_cr_scoring_testimony_021121.pdf], visited Dec. 8, 2004.
15 Serio, pp. 9-10.
16 See, for example, "Industry Brandishes New Credit Score Study," Insurance Chronicle, June
30, 2003, pg. 1.
1" See "Credit-based Insurance Scoring Laws Gained Ground in 2003," BestWire, Dec. 31, 2003
and "U.S. Supreme Court Turns down Allstate's Insurance-score Lawsuit Appeal," BestWire,
Apr. 27, 2004.
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Credit Scores: Credit-Based Insurance Scores, report, January 19, 2005; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc817578/m1/5/: accessed January 16, 2019), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.