Washington Looks At The Use Of Credit Scores By Insurance Industry
On Wednesday, congressional hearings were held on the insurance industry’s controversial use of credit scores in their risk models for calculating premiums.
At a lengthy congressional hearing in Washington on Wednesday, Florida Insurance Commissioner Kevin McCarty brought the state’s long-running battle with the insurance industry over these issues to the forefront. He argued that credit scores are not “fair and valid” criteria for setting insurance rates.
“Studies do show that credit scores can be predictors of future claim activity,” he noted in his prepared testimony. “But the same studies also show that the use of these scores disparately impacts certain classes of people.”
The auto and property insurance sectors have long used credit scoring as a basis for premiums, as it is allowed in much of the country. The use of patient’s credit reports has also started to appear in the healthcare industry.
Consumer advocacy groups have been up in arms over the practice and claim that it is discriminatory. The insurance industry meanwhile has fought strongly against any type regulation that would limit it’s use.
It wouldn’t surprise me if the bills banning the use of credit scores were passed. The industry has faced a large public backlash ever since the aftermath of Hurricane Katrina over their claims paying practices.
