A new credit scoring rule designed to bring insurance consumers more disclosure rights became effective July 1.
“Despite our tough law restricting the use of credit scoring, consumers are still not getting all the information they need,” said Insurance Commissioner Mike Kreidler. “Under this new rule, insurers must tell consumers specifically what aspect of their credit history is affecting their credit score and what steps they can take to improve their score and their insurance rate.”
Under the new rule, insurers can no longer use the term “unfavorable” to describe an attribute of a consumer’s credit history. Instead, they must tell consumers why their credit history affected their ability to get insurance or to get the lowest price, even if the credit score is provided by a vendor. Along with the reason for the adverse action, insurers must also tell consumers:
— What item in their credit history adversely affected their insurance score
— How the item in their credit history affected the insurance score
— What the consumer can do to improve this attribute of their score
In addition, if an insurer uses insurance industry research or studies to justify the effect insurance scores have on premiums or eligibility for coverage, the insurer must file the cited study or information with the Office of the Insurance Commissioner so they are available for public disclosure.
“I would ban the practice of credit scoring in insurance if I had the authority. Until then, if insurers want to continue to use credit scoring, then consumers deserve the best information available to help them get a better credit score and possibly, a lower insurance rate,” said Kreidler.