According to the Property Casualty Insurers Association of America and the National Association of Mutual Insurance Companies, most state regulators participating in the credit-scoring study are sending data call to insurers under their market-conduct examination law and such action falls outside insurance departments' legal authority, the groups contend.

In response, the Missouri Insurance Department, which is spearheading the multistate effort, is sending out a response letter today to some of the insurers providing data for the study which outlines a rebuttal to the trade groups' charge.

The study, which now includes participations from eight states?down from an initial group of 13?will produce a comprehensive analysis of auto and homeowners data at the policyholder level, with an overall report to be written by the Missouri Insurance Department's head of statistics, Brent Kabler, by the end of the year.

The deadline for participating states to turn in the data to Missouri Insurance Department for analysis is Aug. 20. The states currently participating in the study are: Indiana, Louisiana, Maryland, Missouri, Montana, Nevada, Oregon, and Washington.

Prior to the current study the Missouri Insurance Department did a study limited to that state, which concluded credit scoring unfairly impacted consumers in zip code areas with large concentrations of low income and minority residents.

The insurance groups' concerns about the multi-state study were expressed in a strongly-worded letter sent this month to a number of regulators participating in the study. The letter was written by Nat Shapo, an attorney and a former Illinois insurance director, who has been retained by PCI and NAMIC to represent them on credit-scoring study issues.

In his letter, Mr. Shapo told regulators, "PCI and NAMIC believe that information gleaned from market conduct examinations should only be used to determine compliance with existing law, not as the basis for developing new laws."

The industry trade groups, Mr. Shapo further explained, believe that state laws grant insurance regulators the power to demand information from insurers explicitly for the purpose of enforcing existing provisions of the insurance code, not for information that are irrelevant to established statutes and regulations, and certainly not for public-policy research.

Mr. Shapo said, "The explanatory letter accompanying the recent data call makes it clear that the primary purpose of the study is not to verify compliance with existing law."

The Missouri Insurance Department, vehemently denied that regulators are doing anything that could fall outside their legal rights. Mr. Kabler said that while Missouri can't comment on other states' activities and their legal statutes, "We've read the letter and we've prepared a response to it actually."

Mr. Kabler said the department's response to the trade groups' letter is being sent out today. "We are sending it out to companies involved because some of the companies raised very similar questions."

Mr. Kabler noted that the department's response addresses the allegation that regulators are just conducting "a general public policy study that was unrelated to enforcing any given statutes or regulations."

"Obviously, that's the way trade groups are framing it, but that's not our purpose," Mr. Kabler maintained. "The study is being done pursuant to very specific statutes. We are looking at the actuarial validity of credit scoring. We are looking at issues related to Unfair Trades Practices Act with respect to the discrimination."