By Colleen Quinn
STATE HOUSE NEWS SERVICE
STATE HOUSE, BOSTON, OCT. 26, 2011….Insurance agents pushing to ban insurance companies from using credit scores, educational background and other socioeconomic factors when setting auto insurance premiums have dropped their plans to pursue a 2012 ballot question after reaching an agreement with a legislative committee reviewing at the issue.
Frank Mancini, the president and chief executive officer of the Massachusetts Association of Insurance Agents, told the News Service Tuesday the group is pleased with a compromise bill that would prohibit auto insurance companies from using credit scores when setting premium rates.
Sponsored by Sen. Michael Rodrigues (D-Westport), the bill (S 461) was endorsed by the Joint Committee on Financial Services last Thursday. Rodrigues is also the sponsor of a separate bill allowing chains in Massachusetts to hold more alcohol licenses, legislation also aimed at avoiding a ballot fight.
While the bill banning the use of credit scores in rate setting is far from final passage, Mancini said the group has dropped plans for a ballot campaign.
“Any legislative maneuver is a gamble, I guess,” he said. “We had a lot of conversations and have done a lot of work with members of the Legislature, and we are pretty confident the support is there to get this through the House and the Senate.”
Mancini credits two events with moving the legislation along –Attorney General Martha Coakley’s certification of the ballot question, and an August poll that showed nearly 64 percent of likely voters favor a ban on using credit scores and other socioeconomic factors in setting rates. The poll, conducted by JEF Associates, found 29 percent of 609 likely voters approve of their use.
“Those two events seemed to stir the legislative pot a little bit that hadn’t been stirred before. It got people talking,” Mancini said.
Ballot question opponents said they are glad the issue appears moving toward resolution without going to the voters. The question’s withdrawal likely averts an expensive campaign by the insurance industry to fight it.
Rep. Michael Costello, (D-Newburyport), who co-chairs the Financial Services Committee with Sen. Anthony Petruccelli (D-East Boston), said he is confident the bill will make it through the House, and does not foresee opposition “from outside the building” because, he said, all sides on the issue were consulted extensively.
“Knowing we worked hard to get all the interested groups to the table, I think you are going to see it have smooth sailing through the House,” he said. “It will be my job to try to shepherd it through as quickly as I can through the House.”
The group of auto insurance agents filed paperwork in August to initiate a 2012 ballot drive, aimed at preventing what they call discrimination in insurance rates based on credit scores, educational background, and occupation.
“As an association we have always taken the position a person’s auto insurance premium should be based on their driving record and their driving experience, not their socioeconomic status,” Mancini said.
Critics of the ballot proposal said it would eliminate discounts for hundreds of thousands of residents. They also noted that Massachusetts already has regulations in place to prohibit the use of credit scores, education and occupation in rate setting. But proponents wanted those regulations put into law.
The bill approved by the committee would codify in state law the prohibition of using credit scores to determine insurance rates. The use of educational background and occupation will remain prohibited only by regulations, enforced by the state insurance commissioner.
The use of credit scores was the agents’ main concern because companies will often look at those in determining insurance rates, Mancini said.
“That was the most important of the three. Credit is a widely-used criteria,” Mancini said. “We just don’t think it is fair to use, particularly when many credit reports have inaccuracies in them.”
James Harrington, executive director the Massachusetts Insurance Federation, said when the state moved to a competitive auto insurance market in 2008, many drivers became eligible for discounted rates.
“Many of my companies think the use of credit is a legitimate predictor of loss. Nevertheless, it was banned in Massachusetts on a regulatory process,” he said.
Harrington said his trade association is “hopeful” the proposed legislation will not adversely affect consumers who are eligible for discounted rates based on other criteria.
If the proposed ballot question passed, the insurance industry estimates consumers would lose access to an estimated $80 to $90 million in rebates and discounts, according to Costello.
Costello said the committee worked with insurance agents and the industry to strike a balance. The insurance industry believes it can use a multitude of factors, including credit scores and education, to determine auto insurance rates, he said, while the agents prefer policies be set on driving record alone.
“I think both sides of the argument have some merit,” Costello said. “We sat down as a committee and said what are the really important issues to the agents and what are the really important issues to the insurance companies.”
Credit scores stood out as the most problematic factor, Costello said. “The credit scoring, that was the one factor that seemed to be the most egregious, and the most volatile,” he said. “People’s credit scores these days have been taking a beating. There are so many factors that someone’s credit score is based on.”
