The MAIA’s Legislative Bill to ban the used of credit scores when setting policy premiums received initial approval by the House last week. The Bill was filed earlier this year as Senate Bill No. 461 entitled An Act banning the use of certain socio-economic factors for insurance underwriting and rating of motor vehicle liability insurance. In August of this year, the MAIA decided to take a two-prong approach to this issue by filing a ballot initiative seeking a General Law to regulate what an automobile insurer can use in establishing and applying their individual rate filings under the competitive rating statute. The Joint Committee on Financial Services released the legislation last week after months of negotiation as well as the MAIA’s announcement that it had planned to abandon its 2012 ballot initiative to ban the practice.
Currently in Massachusetts, there are administrative regulations the Division of Insurance has issued for the competitive rating of automobile insurance which incorporate the statutory prohibitions and add the additional prohibitions against using “creed; national origin; religion; income; education; and homeownership” as rating factors for underwriting decisions. While the current Insurance Commissioner, Joseph Murphy, has indicated that it is not his intention to amend the regulatory prohibitions in place, the MAIA believes that a statutory prohibition would be a safer long-term solution.
Critics like Massachusetts Insurance Federation’s Executive Director James Harrington, however, have argued in the past to Agency Checklists that “As a regulatory matter, the Insurance Commissioner already bans the use of credit scores and other underwriting factors commonly used in other states. But this group wants a statutory DO NOT ENTER sign that send the message to the industry nationally that Massachusetts is hostile to competition and don’t bother to invest here.”
The Bill as it stands now would codify the prohibition of using credit scores to determine insurance rates but the use of educational background and occupation will remain prohibited only by those regulations which the Commissioner of Insurance enforces. The Bill was moved forward by the House without any debate last Wednesday.
