NAMIC Responds to CEJ Comment on Credit Scoring

July 9, 2004

The National Association of Mutual Insurance Companies has issued a statement in response to the Center for Economic Justice (CEJ) reaction to its policy paper, The Legal Theory of Disparate Impact Does Not Apply to the Regulation of Credit-Based Insurance Scoring (See IJ Website July 8).

“Please attribute to Roger Schmelzer, Senior VP, State and Regulatory Affairs,” the bulletin began. “The point of the NAMIC paper is that ‘unfair discrimination’ and ‘disparate impact’ are not interchangeable terms. ‘Disparate impact’ is a legal doctrine that has to be proved; it does not simply exist,” it continued.

The NAMIC bulletin said: “Either the CEJ does not understand this or they are intentionally trying to confuse the issue. When courts have applied a ‘disparate impact’ analysis, it allows for a ‘legitimate business justification’ defense, which—if the analysis were applied to insurance—credit based-insurance scoring could easily meet because of its accuracy in predicting loss.

“Policymakers deserve a straightforward discussion of this issue. To the extent that it addresses the disparate impact theory and its relevance to insurance at all, the response is superficial and riddled with errors and misconceptions. Bringing clarity to the debate was precisely the reason NAMIC member companies felt so strongly about writing this paper.”

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