BOSTON – Massachusetts Insurance Commissioner Joseph Murphy told Best’s News Service the recently enacted law banning credit-based insurance scoring in automobile insurance underwriting and rating in the state was more than the “non-issue” some industry representatives said it was.
The new law, which was recently signed by Governor Deval Patrick, essentially codifies into law a regulation that had been in place in Massachusetts for some time. But Murphy said it will also prohibit future administrations from deciding to do away with that regulation without going through the state legislature.
Any future changes to the regulation would have to go through a very public and transparent process that also involves the legislature,” Murphy said, though he did admit that from a consumer perspective, “there will be no visible change.”
Murphy said he supports the ban because it “gives consumers more choice in the company they choose for auto insurance and in the cost.” Murphy said it also helps ensure consumers’ rates are based on their driving performance – a position the Massachusetts Association of Insurance Agents has supported in the past.
But insurance industry trade organizations have said a ban does away with one of the best indicators of risk the industry has been using for years.
“We support the ability of insurers to use appropriate tools in their underwriting practices, including tools like credit scoring,” said Frank O’Brien, a vice president for state government relations at the Property Casualty Insurance Association of America. “Since the long-standing regulatory ban wasn’t going to change, the passage of the law doing the exact same thing essentially changes nothing, including our continued support of credit scoring in Massachusetts.”
Willem Rijksen, a spokesman for the American Insurance Association, said consumers actually tend to benefit from the use of credit scoring. “The vast majority of policyholders benefit from lower premiums as a result of credit-based insurance scoring. AIA opposed this legislation because it will prohibit the use of this beneficial tool and result in a disadvantage for Massachusetts drivers.” Rijksen said.
More than half of U.S. states have adopted laws or regulations based on a model law by the National Conference of Insurance Legislators. The 26-state model requires disclosure and use of updated, accurate credit data; bans consideration of certain personal information; mandates filing of scoring models; and prohibits data selling, among other things (Best’s News Service, Oct. 2011).
The top five writers of private passenger auto insurance liability in Massachusetts in 2010, according to BestLink, which provides online access to A.M. Best’s database of insurance information were: Mapfre North America Group, with 27.43% market share, Safety Group, with 11.46%; Liberty Mutual Insurance Cos., with 10.88%; Arbella Insurance Group, with 9.07%; and Plymouth Rock Cos., with 5.95%.
To Read More About This Issue Check Out These Agency Checklists Articles:
- Governor Patrick Signs Credit Scoring Bill Into Law
- House Passes MAIA’s Bill To Ban Use of Credits Scores in Auto Rates
- House Advances Ban On Use of Credit Scores in Auto Rates
- AG Certifies MAIA’s Petition for November 2012 Ballot
- MAIA Files Ballot Initiative to Limit Socio-Economic Rating Factors in Auto Insurance Rates