Insurance companies have been using Insurance Credit Scores for several years now. This information has been used in a variety of ways to underwrite and rate insurance products offered to the public.
As a result consumer groups and states have expressed concern as to how Insurance Credit Scores are being used and what protections consumers should expect. A number of states have passed a variety of laws and restrictions on Insurance companies and how they use the Insurance Credit Score information. It would be impossible for me to keep track of the changes in every state but, this is some of the things Oregon is doing.
In July 2005 the Oregon governor signed the Insurance-Based Credit Scoring, SB 573, which took effect on Jan. 1, 2006. In general, SB 573 set specific criteria for how and when consumer credit information can be used for underwriting purposes.
SB 573, states that insurance companies that issues personal insurance policies, “May not re-rate existing policies or re-rate a customer based on a customer’s credit history or the credit history component of a customer’s insurance score when the marital status of the customer changes due to death or divorce.”
Oregon has other laws limiting the use of credit information some of the current statutory restrictions are:
- An insurer (Insurance Company):
Personal insurance policies may not be cancelled or non-renewed if the policy has been in effect for more than 60 days based consumer’s credit history or insurance score. - Consumer credit history and insurance credit scores may be used to decline coverage of personal insurance when the policy is initially underwritten only in when this information is used in combination with other substantive underwriting factors.
- Insurance companies may offer placement with an affiliate insurance company it is doesn’t constitute a declination of insurance coverage.
In Oregon insurance companies May Not use following types of credit history information to decline coverage of personal insurance, calculate an insurance score or determine personal insurance premiums or rates based on the lack of credit history, or an inability to determine a consumer’s credit history, if the insurance company was given accurate and complete information from the consumer, unless the insurer does one of the following:
- (i) If the insurer presents information that the absence of credit history or the inability to determine the consumer’s credit history relates to the risk for the insurer, uses the absence of a credit history or inability to determine a consumer’s credit history as allowed by rules adopted by the Director of the Department of Consumer and Business Services;
- (ii) Treats the consumer as if the applicant or insured has neutral credit history, as defined by the insurer; or
- (iii) Excludes the use of credit information as a factor and uses only other underwriting criteria.
Oregon also will not allow Insurance companies to consider the impact on a consumer’s credit score based on certain credit inquiries. Credit Inquires often can affect a consumers overall credit score so the following types of credit inquiries are not permitted to be used to lower an Insurance credit score:
- Credit inquiries not initiated by the consumer or inquiries requested by the consumer for the consumer’s own credit information; and
- Inquiries identified on a consumer’s credit report relating to insurance coverage.
Currently Oregon voters are being bombarded with the political advertising over the pending Measure 42 written by Bill Sizemore. On Mr. Sizemore’s website he issues the following statement:
Measure 42, which I wrote, would prohibit the obscene practice of using credit scoring to establish consumer insurance rates or premiums. In case you weren’t aware of it, insurance companies across the country routinely check your credit before issuing you a policy and base their rates largely on the credit scoring models they have created. Consumers beware: The entire system is a scam. MORE….
As a former Oregon Insurance Agent I have my own opinion about Insurance Credit Scoring. It is impossible for me to write this Blog without adding my own editorial on the subject. Since I can no longer vote in Oregon following my move out of state:
A Former Oregonian and Retired Oregon Insurance Agents Opinion:
My hope is that each citizen in the state of Oregon understands that in my own experience insurance scores are not used to rise the rates of consumers who have poor credit histories, rather insurance credit scores are more commonly used to offer those with better credit scores discounts. Should measure 42 pass these discounts will end and the rates of people with lower credit scores will NOT be reduced instead the premium rates of those people being offered discounts will be raised.
I personally urge Oregon voters to vote, “No.” on Measure 42 it will not help those with bad credit and it will only raise the base rate for insurance for those who have higher credit scores.
Related Blogs:
- What is Insurance Credit Scoring?
- What is the difference between Consumer Credit Scores and Insurance Credit Scores?
- How do Insurance Companies Decide what a persons Insurance Credit Score is?
- What do Insurance companies do with the Insurance Credit Score?
- What happens if there are errors on a persons credit reports?
- Where to check the information Insurance Companies Use to Compute Your Credit Score.
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