Mass. Agents Drop Push for Insurance-Scoring Ballot Initiative

The Massachusetts Association of Insurance Agents (MAIA) has dropped its ballot drive to ban auto insurers from considering credit scores, education and occupation in setting premiums, instead backing a revised bill that would legally prohibit only some of those factors from being used, a spokesman said Wednesday.

The compromise legislation—redrafted at the request of a joint House and Senate committee reviewing the issue—would outlaw the use of credit histories and leave in place administrative regulations under which a consumer’s education and job history may not be used.

Credit cardsSpokesman Daniel Foley said MAIA officials are confident the revised bill will be passed, eliminating the need to go through the long and costly initiative process.

“We think credit is the more important of the three factors,” Foley said in a phone interview.  “We felt that this was the best compromise we could get.”

MAIA officials had been criticized by organizations including the Property Casualty Insurers Association of America (PCI), for their dual efforts to outlaw the use of socioeconomic factors in the underwriting and rating of private vehicle coverage, a practice commonly referred to as insurance scoring that has become a hot-button issue in the Bay State.

Insurers have long supported the analysis of a person’s credit to help set rates, claiming statistics show that credit status is a reliable predictor of risk that allows coverage providers to set rates more accurately.

According to the Insurance Information Institute (III), only Massachusetts and California have regulatory bans on the use of credit histories for rating purposes. Credit scoring is prohibited by law for auto coverage in Hawaii, III says.

A Federal Trade Commission (FTC) study found that credit scores do appear to correlate closely with the rate and size of claims filed, but exactly why is unclear.

According to MAIA and other critics, however, insurance scoring unfairly punishes low-income consumers by basing rates on factors that have nothing to do with driving.

MAIA officials contend that auto premiums should be based as much as possible on consumers’ driving records and years of experience behind the wheel, and that consumers who are browsing  Massachusetts car insurance quotes should not have to pay more because they have a few dings on their financial record.

The state already has in place administrative regulations that prohibit insurers from using credit scores, educational history and employment background in setting premiums.

In launching their ballot drive in August, MAIA officials had said those regulations provide too little protection because, without formal legislation to prevent it, the state insurance commissioner would be free to amend those rules following a public hearing, officials point out.

“We’ve received assurances from Commissioner Joe Murphy that he has no intention” of changing those regulations, Foley said.

About Gregor McGavin
Gregor McGavin is an award-winning journalist who has reported across the country for such publications as The Associated Press, the Arizona Republic, the Pittsburgh Tribune-Review and the Press-Enterprise.

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