“Wisconsin consumers pay some of the lowest insurance premiums in the country and enjoy a stable, vibrant insurance marketplace,” said David Snyder, AIA vice president and assistant general counsel. “Using credit information as part of the rating or underwriting process helps insurers more accurately assess, and price, for an individual’s risk, thereby reducing subsidization of bad risks by good ones, making the system fairer for everyone.”
The Assembly Committee on Insurance held an informational hearing today to discuss the use of “credit scores” by the insurance industry. Countless studies by Federal and state regulators, universities, independent auditors and insurance companies have proven that consumers with better insurance scores generally file fewer claims and have lower insurance losses.
Additionally, credit information is completely objective and “blind” to legally prohibited factors such as race, religion, marital status and nationality. In addition to state and federal consumer protection laws, insurance regulators are charged with ensuring that consumers are not charged rates that are “excessive, inadequate, or unfairly discriminatory.”
“Insurers are subject to strict legal standards for all risk classification variables, including credit, and the state of Wisconsin has a strong regulatory system that has worked well for consumers and insurers. There is no need for any drastic action that would end up harming the market,” added Snyder.
Insurance companies have used credit information since the mid-1990’s. In Wisconsin, insurer use of credit is regulated by the Office of the Insurance Commissioner’s Bulletin 6-16-97, referencing § 628.34 of the Wisconsin statutes.
The property/casualty industry in Wisconsin employed more than 18,000 and paid more than $144.8 million in premium taxes alone in 2005. Additionally, insurers are a major source of capital for governmental bodies in the state. According to analysis of A.M. Best data, they held $6.9 billion in Wisconsin municipal bonds in 2005 – approximately 20% of the outstanding state and local government debt in the state.
About AIA
The American Insurance Association represents approximately 350 major insurance companies that provide all lines of property and casualty insurance and write more than $123 billion annually in premiums. The association is headquartered in Washington, D.C. and has representatives in every state. All AIA press releases are available at www.aiadc.org.