insurance underwriting;
credit history
HB 2386 establishes protocol for providing consumers with information regarding the use of credit information for insurance underwriting purposes.
A strike-everything amendment on the same
subject will be offered in the Committee on Financial Institutions and
Insurance.
Many
insurance companies will derive information contained in a consumer's credit
report, such as bill payments, number of accounts, length of credit history,
and consumer debt, and use a model system to apply an insurance score to the
applicant. This score is then used to determine what an applicant’s premium
will be and is considered by insurers to be an accurate means to determine
future risk. Insurance carriers deem this scoring model proprietary information
as it contains their internal pricing index, so an insurance score is not
public information. It is important to
note that scores and models vary per company and can change from month to
month, so an exact scoring formula is difficult to ascertain.
Concerns regarding the use of the credit information and its impact on insurance premium rates have been raised, particularly when information contained in the consumer report is inaccurate. In addition, there is little information provided to the consumer about how their information is weighted to derive an underwriting decision (i.e., number of revolving accounts and balances). Improved consumer awareness regarding the use of credit history as a tool for underwriting could enable the consumer to take necessary steps to improve an insurance score and possibly modify a premium rate. HB 2386 establishes protocol for insurance companies to provide consumers with information regarding the use of credit information for insurance underwriting purposes. The legislation also requires insurance companies to reconsider underwriting decisions if a consumer provides them with corrected credit information.