Maryland, in addition to its own research, examined not only the Missouri report but studies by Alaska, Michigan, Virginia, Washington, the National Association of Insurance Commissioners, consumer groups and industry advocates. Maryland said the studies were in conflict and there is not enough information to make a proper finding.

“At this time, there is insufficient data to conclusively determine whether the use of credit scoring by insurers has an adverse impact on low-income or minority populations,” the Maryland department said. “This is due, in part, to the fact that the insurers do not collect information regarding an applicants race or income.”

No analysis regarding the correlation between credit scoring and other rating factors exists, according to Maryland.

The Maryland department said a number of factors “may reduce the credibility” of its own report, including a lack of data or data that could not be processed. Besides being unable to reach a definitive conclusion, Maryland said it did not have “resources for a comprehensive study.”

Maryland said a more thorough and reliable study is recommended and noted it would be part of an 11-state study that has been initiated by Missouri.

In criticizing the Missouri insurance department report, Maryland regulators said the study failed to explain why minorities and low-income populations have low credit scores and did not report differences in premium paid by low-income and minority residents compared with others in Missouri.

The Maryland report noted that despite their advocacy of credit scoring, insurers are unable to explain clearly “why the use of credit history is a reliable predictor of risk/loss.”

Marylands report was requested by the legislature in 2002 when it passed legislation regulating credit scoring. Part of the measure banned insurers from using credit histories to refuse to underwrite or rate a homeowner for insurance.

The Rhode Island credit proposal, H7705, was denounced by the American Insurance Association, which said it would “damage the marketplace.” Michael Moran, a representative for the Washington-based AIA, noted that Rhode Island just two years ago had thrashed out the issue and passed legislation based on a National Conference of Insurance Legislators model.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, February 20, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.