"While insurers extol the value of credit scoring as a predictor of risk, asserting that it allows more accurate pricing and greater availability of coverage in urban areas, consumer advocates and agents have voiced strong opposition to the reliance on this screening tool," said Mr. Grannis at the hearing. This raises concerns that credit scoring is "unfair, arbitrary, secret and biased, particularly against poor, minority, young and senior consumers," he said.

Mr. Grannis also said that from his perspective as the assembly's insurance committee chair, it's the insurance industry that carries the burden of proving the fairness of credit scoring. But to date, "I have not seen much that commends this as a proper rating or underwriting method," he remarked.

Guillermo Martinez, legislative director for Mr. Rivera, told National Underwriter that "New York is definitely lagging behind many other states on this issue."

Mr. Martinez said that New York state residents are especially hard hit by the adverse impact of credit scoring.

"The credit scoring takes into account someone who doesn't have any credit history, and New York is a state of immigrants," he explained. "In the past 10 years, 4.5 million people from all over the world came to New York, and most of them do not have established credit histories," he said.

Mr. Martinez added that many immigrants obtain loans from nontraditional sources such as local community groups, and "paying off these loans successfully doesn't get recorded in credit bureaus."

He said the three million people in New York who don't have health insurance are subject to unfairly low credit scores. When they have difficulty paying medical bills the information gets recorded at credit bureaus?so to "insure their cars, they pay more, essentially because of their lack of health insurance."

This past June the Assembly approved a bill to ban credit scoring that Mr. Rivera introduced, "but the Senate didn't want to ban it, and we weren't able to reach a compromise," Mr. Martinez said.

But Mr. Martinez added that there will be a big media push in New York to shed more light on this issue in coming months. "State Assembly members will send letters and talk to local newspapers---the idea here is to bring more media attention to this issue.

"There will also be a second public hearing in January, and then we are going to put more pressure on the Senate," he said.

On the other side of the debate at the hearing, insurance industry representatives defended insurance credit scoring, arguing that this risk-assessment tool helps to keep the New York auto market competitive.

"We believe that insurance scoring has increased choices for consumers in the state. Many significant challenges in this market have in some measure been off-set through the use of insurance scoring," said David Snyder, vice president and assistant general counsel at Washington, D.C.-based American Insurance Association, in remarks prepared for the hearing.

Mr. Snyder also argued that using credit scores allows companies to "more accurately predict risk, and this means many consumers pay a lower premium than they would have under previous rating systems." He commented that Maryland, which has banned the use of insurance credit scores, has seen market contraction and increased consumer complaints.

The New York Insurance Association's vice president, Ellen Melchionni, said the charge that credit scoring has disparate impact on minorities or low-income groups is simply untrue.

In remarks prepared for the hearing, Ms. Melchionni said, "Some of the best insurance scores appear among low- and moderate income groups." She also assured that individual errors in credit reports are "unlikely to have a large impact on an insurance score," and that most insurers will reevaluate and recalculate a premium if the policyholder finds an error in their credit report.

Ms. Melchionni also observed that over the last few years, nearly half of all state legislatures considered bills to ban or severely restrict the use of insurance credit scores. But when presented with all the facts, "most states took no action on these proposals," she said.

Separately, in Texas, the Department of Insurance held its own public hearing last week as part of its rulemaking process on insurance scoring and territorial rating.

"We held a public hearing to allow our insurance commissioner, Jos? Montemayor, to get input from interested parties regarding two proposed rules, on credit scoring and territorial restrictions," said Jim Hurley, the department spokesperson.

These proposals are being promulgated as a result of Senate Bill 14 passed this summer in Texas, Mr. Hurley explained. "What happens is the Department of Insurance proposes rules and then the commissioner can decide to adopt them, adopt them with changes or reject them altogether," he said.

Mr. Hurley added that "actual proposals set a 15 percent cap on territorial restrictions. And then on credit scoring, the proposals do not set a cap, but they say it will be examined and the commissioner has the authority to set whatever limits he feels is required. But the commissioner has not made a ruling yet."

At this point, what is being required for insurers in Texas is to file their credit-scoring models with Texas Department of Insurance. "We are examining those models and we are going to examine the data that goes into those models, because we want to better understand how credit scoring is being used and we want to make sure that it is actuarially justified," Mr. Hurley told National Underwriter.

At the public hearing, the insurance department heard from people representing the insurance industry as well as consumer groups. "The industry groups were stating that credit scoring is a necessary variable, while consumer groups were basically saying credit scoring should not be allowed, but that if it is allowed, there should be certain restrictions," Mr. Hurley said.

In Pennsylvania, a proposed bill to restrict insurance credit scoring is currently being criticized by insurance representatives. According to the AIA, S 942, sponsored by Pennsylvania state Senator Anthony Williams, D-Philadelphia, goes farther than the National Conference of Insurance Legislators (NCOIL) model act in restricting the use of credit scores.

"Upon first review of S 942, we are concerned that the legislation could have unintended negative consequences for Pennsylvania consumers," commented the AIA's Mr. Snyder in a statement.

He said the use of credit scores has resulted in more choices for consumers in Pennsylvania, and this legislation could "reduce competition or raise rates for good drivers and responsible homeowners."