NAMIC, APCIA reject proposed bill banning credit factors in auto underwriting
Industry leaders are less than enthused by the proposed Preventing Credit Score Discrimination in Auto Insurance Act.
In recent years, much controversy has surrounded the practice of using non-driving factors in determining car insurance rates. This week, the issue was front and center at a hearing of the House Financial Service’s Subcommittee on Housing, Community Development and Insurance.
At the hearing, H.R. 1756, the Preventing Credit Score Discrimination in Auto Insurance Act, was a central topic of conversation. The bill aims to prohibit auto insurers from using credit reports, credit scores, and other consumer information when calculating insurance premiums.
Erin Collins, vice president of state affairs for NAMIC, appeared at the hearing, where she voiced strong opposition against the proposed legislation. In her arguments, Collins stated the law would undermine various studies that have proven credit factors to be beneficial to consumers and explained that advanced underwriting details help insurers to assess risk better and provide better prices to consumers.
“The goal of insurance underwriting is to correlate the prices for insurance policies as closely as possible to the likely cost of claims generated by those policies,” Collins said in her testimony. “Utilizing predictive information is unavoidably central to this process as insurance differs from most other products because the actual cost of providing insurance is unknown. Looking back at historic losses helps to forecast future losses, but prior claims alone do not provide enough information to serve as an adequate predictor of future risk.”
Further, Collins assured lawmakers that states have consumer protection laws and regulations to ensure predictive underwriting factors are non-discriminatory.
In a statement, Nat Wienecke, senior vice president of federal government relations of the American Property Casualty Insurance Association (APCIA), also voiced concerns over the proposed bill. “APCIA urges the Subcommittee to work with the insurance industry to address the underlying issues that can make insurance unaffordable for some drivers, rather than consider legislation that eliminates many risk-based rating factors,” said Wienecke. ”That’s why insurers are committed to long-term highway safety and safe infrastructure solutions to prevent crashes. Insurers are working to reduce crash-related costs, such as skyrocketing medical costs, frivolous lawsuit abuse, insurance fraud, and escalating auto body and repair costs.
“While this legislation is well-intentioned, it would upend risk-based insurance, outlaw factors that actually provide discounts for many policyholders, and create potential availability problems that do not now exist. Legislation to ban rating factors, such as credit-based insurance scores, which have been proven to help insurers more accurately predict the likelihood and severity of future insurance claims, would likely have a negative impact on most consumers.”
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