Mich. Commissioner Demands Insurers’ Scoring Models

February 19, 2003

A new bulletin requires Michigan insurers to begin providing more information to consumers about the use of credit to calculate rates by July 1.

Bulletin 2003-01-INS, issued by Michigan Financial and Insurance Services Commissioner Frank Fitzgerald, requires insurers to complete “actuarial justification” of how they use insurance scoring by June 30, 2004.

The bulletin also requires that insurers doing business in Michigan will have to recalculate scores annually or whenever errors on a consumer’s credit report are corrected.

The bulletin will require any Michigan insurance company using a discount based on consumer credit information to annually notify auto and homeowners’ policyholders or applicants of the credit score used to apply an insurance credit scoring discount, and the discount tier in which the insured or applicant is placed.

Insurers must also now actuarially certify the discount granted to policyholders or applicants with no credit history (“no hits”), or whose credit history does not reveal all the credit factors used by the company’s formula (“thin files”) to determine the insurance credit score. This certification must occur for any new coverage or renewal coverage effective on or after Jan. 1, 2004, and on an annual basis thereafter.

In addition, insurers will be required to file their insurance scoring formula with the Office Financial Services (OFIS) by July 1 for any new coverage or the renewal of coverage effective on or after that date, as well as the specific credit classification factors used to calculate an insurance credit score, and an actuarial certification justifying the discount levels and discount tiers offered by the company.

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