H-3795 “An Act Prohibiting The Use of Credit in Underwriting and Rating Private Passenger Motor Vehicle Insurance” is now Massachusetts law. On November 22, 2011 Governor Patrick signed the bill which will now be known as Chapter 195 of the Acts of 2011. The measure codifies into law the current administrative ban on the use of credit scoring in private passenger motor vehicle insurance in the Commonwealth.
The MAIA hailed the enactment of what it considers a vital piece of consumer protection legislation. “We want to commend the legislature and the Patrick Administration for their leadership and support on this important issue,” said Frank Mancini, President and CEO of MAIA. “Especially during these difficult financial times, this legislation will provide Massachusetts consumers with much-needed protection against unfair, unreliable, and discriminatory rate-setting practice.”
A poll that the MAIA had commissioned in August of this year demonstrated that Massachusetts voters had overwhelmingly supported this measure. The association says that by a margin of 68.3% to 31.6% respondents across all demographic groups believed that auto insurance premiums should be based as much as possible on an individual’s driving record and years of driving experience. “People just don’t believe their financial woes or a mistake on their credit report should affect their ability to buy affordable auto insurance,” stated Mancini. “We were gratified to see so many officials on Beacon Hill share this sentiment and take action to prevent this from occurring.”
In a press release Representative Michael Costello (D-Newburyport), The House Chairman of the Joint Committee on Financial Services concurred with the MAIA. “This is a win for the consumers of Massachusetts. Of all the factors we heard about, a person’s credit score is the most volatile. There are issues around inaccuracies in credit score reports, and, particularly during these difficult economic times, people’s credit scores can fluctuate if they happen to lose their job. They should not be punished by paying high auto insurance premiums.”
In the same release, Don Beaulieu of the Beaulieu Insurance in Amesbury said he was very happy with the results. “The Agents Association has worked hard on this bill. It provides a high level of consumer protection against the use of credit, which doesn’t make much sense relative to the cost of auto insurance. It’s a better level of protection against economic factors, which are beyond their control.”
Jason Calianos, of Calianos Insurance, who is also head of the Massachusetts Urban Agents Association, testified at the hearing and thinks overall that the bill’s passage is a great start. “Frank Mancini and Dan Foley [of the MAIA] did a great job [but] here’s my fear. I fear there are other ways for insurance companies to create proxies. It’s important to have the language in there [the new law] but we’re finding that the insurance companies are already working around this issue to find other ways in which to rate insureds, for example by education level or profession.” He says that he and other urban agents have already seen prices for urban drivers increase dramatically and believes that it is due to insurance companies use of proxies. “Urban agents are on the front line of this issue and so are hyper sensitive to it.” He says it’s been very hard for him to have to tell a lot of his clients that their auto insurance is going to be $3000 for this year and to see their reactions.
The MAIA has provided a copy of the newly signed law which you can view here: An Act Prohibiting The Use of Credit In Underwriting and Rating Private Passenger Motor Vehicle Insurance.
