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February 19, 2009 Thursday 04:54 PM EST

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Insurers, Advocates Make Cases on Credit Scoring at Florida Hearing

Sean P Carr

TALLAHASSEE, Fla.

Florida insurance regulators held a marathon public hearing on the use of credit-based insurance scoring, with representatives of five insurance companies and several consumer interests giving testimony, in advance of the upcoming legislative session.

Five insurance companies -- Allstate, Geico, Nationwide, Progressive and State Farm -- received subpoenas requesting their presence at the hearing as well as documentation on how they use credit scores in underwriting for personal lines of insurance. Representing consumers at the eight-hour hearing were the Center for Economic Justice and the NAACP, among other organizations.

The Office of Insurance Regulation, which held the hearing, is considering new regulation that would require insurers that use credit-based scoring to more comprehensively detail and document their use of the practice in order to show that it does not have the unintended effect of discriminating against lower-income and minority policyholders, as some consumer advocates contend.

"The ultimate result cannot be any discriminatory effect," said Ed Domansky, a spokesman for Insurance Commissioner Kevin McCarty.

State Sen. Ronda Storms, R-Dist. 10, has pre-filed a bill to curtail the use of credit-based insurance scoring. The state's legislative session begins March 2.

Liz Reynolds, southeast state affairs manager for the National Association of Mutual Insurance Companies, said the hearing, while lengthy, was informative. The insurance industry and advocates of credit-based insurance scoring maintain it is an effective and accurate underwriting tool.

"By considering credit information, along with other familiar factors such as driving experience, previous claims, and vehicle age, insurers are able to develop a more complete picture of a consumer's risk characteristics," said Jessica Hanson, public affairs manager for the Property Casualty Insurers Association of America.

Florida Insurance Consumer Advocate Sean Shaw was not convinced that the practice is not bad public policy. "I didn't see enough data that proved to me why rates have to go up if you don't use credit scoring," he said.

The top five writers of private passenger auto insurance in Florida in 2007, according to A.M. Best state/line product information based on direct premiums written, were: State Farm Group, with a 21.3% market share; Allstate Insurance Group, with 14.8%; Berkshire Hathaway Insurance Group, with 13.3%; Progressive Insurance Group, with 10.6%; and USAA Group, with a 4.7% market share.

The top five writers of homeowners multiperil in Florida in 2007, according to A.M. Best Co. state/line data, , were: State Farm Group, with a 21.3% market share; Citizens Property Insurance Corp., with 20.5%; Universal P&C Insurance Co., with 6.1%; USAA Group, with 5.2%; and Tower Hill Group, with 4.4%.

(By Sean P. Carr, senior associate editor, BestWeek: Sean.Carr@ambest.com)

February 20, 2009

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