The Colorado Senate yesterday, passed legislation (SB 216) that follows the National Conference of Insurance Legislators (NCOIL) credit-based insurance scoring model act.
“This legislation provides lawmakers a positive alternative to banning insurers’ use of credit information in personal lines insurance,” said Michael Harrold, assistant vice president and regional manager for the Property Casualty Insurers Association of America (PCI). “We urge the House to pass this bill. It preserves insurers’ ability to use this highly predictive information and contains several consumer protections. If the bill passes both chambers, we expect that the governor will sign the legislation. Governor Owens and his administration have expressed its opposition to a complete ban on insurance scoring and understand the negative impact it would have on the overall marketplace. Enacting the NCOIL model will benefit most Colorado consumers by preserving the discounts that policyholders with good insurance scores have earned. Efforts to ban insurance scoring are counter productive because they will force consumers who are less likely to file a claim to pay more for insurance in order to subsidize higher-risk consumers.”
Senate Bill 216 closely follows the NCOIL model by specifying how credit information may be used. It requires insurers to disclose if credit information will be used for underwriting or rating. Insurers are required to file scoring models with the insurance commissioner and the bill provides for the model to be treated as a trade secret.
An insurer that takes an adverse action based on credit information must provide the consumer with reasons for the adverse action. In addition, the bill provides two consumer safeguards not included in the NCOIL model. Under SB 216 individuals are protected from being adversely affected by identity theft or the negative credit information of a former spouse.
“This legislation offers a viable alternative to a provision that was added to House Bill 1292 that would ban insurance scoring. The NCOIL model addresses the most frequent complaints of consumers and agents by instituting strong consumer protections and strengthens the personal lines market by maintaining competition, choice and accuracy of risk measurement,” said Harrold.
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