Florida Commissioner Kevin McCarty said during the Spring Meeting that the goal of the hearing is to examine how insurer use of credit history is affecting consumers in today's difficult economic environment. Both he and Oklahoma Commissioner Kim Holland told the Executive Committee there is no motive behind the hearing aside from gathering information on the issue.

The National Conference of Insurance Legislators (NCOIL) sent a letter in advance of today's hearing arguing that its Model Act Regarding Use of Credit Information in Personal Insurance, which it put forth in 2002, "was and remains a timely and effective response to consumers who feel blindsided by insurer use of their credit information…."

NCOIL added that it will consider a revision at its July Summer Meeting "to target consumers whose fallen credit is traceable to the financial crisis not of their making." The NCOIL letter adds, though, that the model act already contains extraordinary life events language.

"We as legislators have a duty," the letter states, "to promote balanced public policy that safeguards our constituents from possible abuse. The NCOIL model act – which evolved through two years of special sessions, model drafts, and many hours of debate with all key players – does just that. It has become the standard for state insurance scoring policy…."

Insurer associations, argue that credit scoring is an actuarially sound predictor of risk, and to rule it out would mean good risks would be forced to subsidize bad risks.

Consumer groups respond that the use of credit information for the purpose of determining rates discriminates against low-income and minority consumers because of the racial and economic disparities inherent in scoring.

Robert P. Hartwig, president of the Insurance Information Institute said in prepared testimony that, "a silver lining of the current financial crisis is a change in the credit profile of the average American household wherby outstanding debt is reduced to more manageable levels. This should lead to an improvement in the health of the typical consumer's (and family's) balance sheet.

"It is a common misconception that during a recession virtually all consumers's credit scores, and hence insurance scores will fall," he said.

Mr. Hartwig added that "Insurance scoring is a proven, accurate, objective and consistent risk assessment tool used widely in the underwriting of auto and homeowners insurance. The data supporting its use are statistically irrefutable, and the benefits to consumers are significant,"

Speaking to the effects of the struggling economy, the insurer groups have noted that LexisNexis reports that analysis of recent insurance score trends does not reflect an overall deterioration of scores. "In fact, of the millions of scores processed by LexisNexis, a slight score improvement has been recorded over the past five years," the insurer groups said.

The insurance associations also pointed to numerous studies conducted by departments of insurance of various states, as well as the Federal Trade Commission (FTC). The insurer groups said these studies show that credit-based insurance scoring is an objective, reliable underwriting and/or rating tool that benefits a majority of consumers.

Four consumer groups have previously argued that studies by the Missouri and Texas departments of insurance found that insurance scoring discriminates against low income and minority consumers.

"The Missouri study concluded that a consumer's race was the single most predictive factor determining a consumer's insurance score and, consequently, the consumer's insurance premium," they said.