Released: October 30, 2006

Should credit affect insurance?

Source: By Christine Dugas, USA Today

Oregon is the latest battleground in an effort by consumer advocates to block insurers from using credit scores to set auto and homeowner rates.
On Nov. 7, Oregonians will become the first voters in the USA to decide whether to bar insurers from setting premiums based on such factors as credit history, debt load and bill-paying habits.

The insurance industry, which opposes the measure, is pumping millions of dollars into an ad campaign to defeat it. The outcome will be closely watched by other states that could come under pressure to take similar steps if the Oregon ballot measure succeeds. Hawaii, California and Massachusetts already have bans.

The battle comes as the use of credit scores — 92% of insurers factor them into auto rates, Conning Research & Consulting says — is under scrutiny elsewhere:

• The Michigan Court of Appeals will decide whether insurers can use credit scores to set rates. The state insurance department had barred such use of the scores, but its ban was struck down by a state judge.
• The U.S. Supreme Court has agreed to review lawsuits that complain that insurance companies failed to inform consumers that low credit scores led to higher rates. The lawsuits argue that failure to do so violated the Fair Credit Reporting Act.

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