Auto insurance companies would be barred from using credit ratings as a factor in setting auto insurance premiums under a bill passed by the Arkansas House Monday.
Rep. Rick Green (R-Van Buren), said he drafted the legislation after a couple told him their rates were raised because they paid off their credit cards. The couple didn’t have large file of credit information and were considered a credit risk.
“Another man told me he always thought paying off his credit card would be a good thing and then his auto insurance went up $300,” Green said.
The House voted 72-20 in favor of the legislation, with two members voting present, despite concerns from some members that the change could lead to higher insurance rates for all Arkansans.
Rep. Bruce Maloch, D-Magnolia and a banker, said insurance companies need credit reports to do the best job possible assessing their clients’ risks.
“They offer discounts to those with good (credit) ratings. If you do away this, you do away with the discounts,” he said.
But Rep. William Sample (R-Hot Springs), said his insurance company raised his rates because he owns a business and has a high credit limit on his credit cards even though he hasn’t used the credit.
Sample said he supported the change.
Rep. Randy Rankin (D-Eudora), told House members he was fed up with pressure from insurance lobbyists to vote against the bill. Ranking read a letter from the president of two insurance companies stating that the bill could lead to rate increases.
“I don’t like threats and that’s why I’m voting for this,” he said.
Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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