Credit Scoring Bills Still On NAMIC Agenda

By Matt Brady

NU Online News Service, Jan. 17, 3:46 p.m. EST?The National Association of Mutual Insurance Companies has laid out an agenda for state-level legislation, focusing on changes in rate regulation, civil litigation reform, and use of credit scoring and claim records for underwriting.[@@]

Roger H. Schmelzer, NAMIC senior vice president-state and regulatory affairs, said the group's top priority is an effort to eliminate prior approval systems for insurance rates, which NAMIC said will foster a more competitive insurance market.

The drive to do away with prior approval, Mr. Schmelzer said, appears to be moving in a positive direction for NAMIC. "We are encouraged to see a growing number of states consider legislation to move away from a prior approval standard for rates," he said.

Also key to NAMIC's agenda is the protection of underwriting tools, specifically the ability of insurance companies to use databases and credit-based insurance scoring.

"Protecting underwriting tools is how NAMIC describes any attempts by lawmakers to limit an insurer's ability to use credit-based insurance scores for rating and underwriting purposes or to impose any restrictions on the use of loss history such as the Comprehensive Loss Underwriting Experience database," said Mr. Schmelzer.

He said a recent Texas Department of Insurance study "is another in a long line of findings that proves the relationship between credit-based insurance scores and frequency of claims. Consumers benefit when insurers price policies according to risk."

The C.L.U.E. and credit record-based scoring issues have typically been listed individually on insurance agendas in recent years, but the grouping of them under the "protection of underwriting tools" heading should in no way be considered a sign that they are fading in importance, according to a NAMIC spokesman.

Credit scoring bills are "not at all" going away, said NAMIC spokesman Rick Nelson. "In fact, it's the opposite. Efforts to introduce bills partially or entirely banning credit-based insurance scoring are pretty active."

The new means of referring to the issues is part of an effort "to try and frame the issue the way we see it," Mr. Nelson said. "It's about the ability of an insurer to use proven and valid tools to set rates and determine risk."

A third major focus for NAMIC in statehouses across the country will be civil litigation reform.

The organization "will work in the state legislatures to reduce the excesses of our current tort system," Mr. Schmelzer said. "These excesses usually occur when courts stop resolving disputes and morph into venues for the pursuit of money or become arenas in which to circumvent the regulatory or legislative process."

NAMIC also said that it will seek to make its voice heard as the National Conference of Insurance Legislators considers its Market Conduct Surveillance Model Act.

The group said it will argue for the strengthening of insurers' self-evaluative privilege protection. The group will also call for passage of the Asbestos Claims Priorities Model Act, which would allow for cases involving asymptomatic asbestos claimants to be placed on an inactive docket until the claimant shows some signs of illness.

The asbestos measure would also prevent "venue shopping" by requiring that claims must be filed in the jurisdiction where the primary harm of exposure occurred.

Additionally, NAMIC will continue to push for the modernization of statutes for small "farm mutual" property and casualty insurers, and for repeal or amendment of the Standard Fire Policy requirement to allow for the exclusion of loss or damage due to fire ensuing from terrorist events.

Commercial insurers' losses from terrorism events are backed up by the federal government under the Terrorism Risk Insurance Act, but that legislation does not apply for personal lines.

"NAMIC is anticipating an active year for property-casualty insurers," Mr. Schmelzer said.