Property Casualty Insurers Association of America called the bill "a positive alternative" to banning the insurers' use of credit scoring.

Last month the Massachusetts Senate introduced bill SB 2093 that would ban the use of credit-based insurance scores, and in January, Missouri Governor Bob Holden said he wants a legislative ban on insurers' use of credit scoring, after an insurance department study found that credit scoring hurts low-income and minority policyholders.

Commenting on the Colorado Senate's insurance-scoring legislation, Michael Harrold, assistant vice president at the Des Plaines, Ill.-based Property Casualty Insurers Association of America, said the bill provides lawmakers "a positive alternative to banning insurers' use of credit information in personal-lines insurance."

Mr. Harrold said the bill, which would preserve insurers' ability to use "this highly predictive information," contains several consumer protections.

Enacting the NCOIL model-based bill, he said, would benefit most Colorado consumers by keeping the discounts that policyholders with good insurance scores have earned. Efforts to ban insurance scoring are counter-productive, he remarked, because they force consumers who are less likely to file a claim to subsidize higher-risk consumers.

PCI observed that if the bill passes muster with the Colorado House lawmakers, Governor Bill Owens is expected to sign the legislation. "Gov. Owens and his administration have expressed their opposition to a complete ban on insurance scoring and understand the negative impact it would have on the overall marketplace," Mr. Harrold said.

Senate Bill 216 closely follows the NCOIL model. The legislation specifies how credit information may be used, and it requires insurers to disclose if credit information will be used for underwriting or rating.

Additionally, insurers would be required under the bill to file scoring models with the insurance commissioner, and the bill also provides for the model to be treated as a trade secret.

Under the bill, an insurer that takes an adverse action based on credit information must provide the consumer with reasons for the decision. The bill also 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.