Insurance providers would be prohibited from setting premiums based on credit scores under legislation proposed by Rep. Dorothy Butcher, D-Pueblo.
The House Business Affairs and Labor Committee on Thursday approved House Bill 1143 by a vote of 6 to 5.
But an association representing the insurance industry vowed on Friday to fight the legislation on the House floor.
Butcher said the current policy is unfair because there’s no correlation between credit and risks.
“To date, no casual connection has been shown that indicates consumer credit scores are a good predictor of claims frequency,” Butcher said. “… An individual’s ability to drive, whether he or she is a responsible homeowner, these are not at all related to credit scoring.”
Butcher said the practice of credit scoring to set premiums amounts to “discrimination.”
But Kathy Campbell, regional manager and counsel for the Property Casualty Insurers Association of America, called the legislation “a major step backward” and said it could ultimately hurt consumers.
“Every credible study demonstrates the strong connection between credit information and risk of loss,” Campbell said in a statement. “As a result, the use of insurance scores enable insurers to make more accurate predictions about which consumers are likely to experience claims.”
She added that if insurance companies are prohibited from using credit scores, the customers with the lower risk will end up paying more to subsidize higher-risk consumers.”
Rep. David Balmer, R-Centennial, said he opposed the proposal when it came up in two previous sessions, during which it died in committee.
Balmer said he believes that credit scoring is an appropriate and accurate way for actuaries to assess risks, saying those with a low credit score who practice responsible financing are likely to drive more cautiously.
The vote for HB 1143 fell more or less along party lines with six committee Democrats voting in favor of the bill, four Republicans voting and one Democrat voting against it.
Insurance companies are not in the business of extending credit. FICO scoring was created to allow a lender to determine their risk and the likely hood if they lend money to a borrower what the chances are that borrower would be late or could be late, or even default on the loan. Insurance companies currently have approximately 27 different ways to determine a risk assessment, like age, driving record, type of car you drive etc, but whether or not you pay your JC Penny card on-time has absolutely no bearing on the fact your going to get in a car accident!
If we apply the same mentality to determine risk like people such as Rep. Blamer, R-Centennial and Kathy Campbell, a paid lobbyist for the Insurance industry are using we can say that people who don’t have college degrees are more likely to commit a crime, so lets throw them in jail now and limit their economic chances now, before they actually do it. One would say this is absolutely absurd but isn’t that what they are essentially doing?
Laws Prohibiting Insurance companies from using FICO scoring to determine your property casualty rates has been been passed in Michigan and a couple of other states. This practice started in California when insurance companies couldn’t get higher insurance premiums approved they turned to this tactic claiming they had higher risk if your FICO score was lower.
People have very little control over the fact that thousands of discrepancies get falsely reported every year. People are required to have casualty insurance and if they don’t the government can throw you in jail for it. This legislation much needed and long over do. It is clear that Rep. David Balmer, R-Centennial represents ” big business”, not the rights of individual constituents. A perfect example of whats wrong with our government. Write him and ask him to start representing the people not corporate America and support House Bill 08-1143.
DAVID BALMER Assistant Minority Leader Colorado State Representative, District 39 Office Location: 200 E. Colfax Denver, CO 80203 Capitol Phone: 303-866-2935
