“This is the latest in an increasingly long list of federal and state government studies that show that credit scoring benefits far more people than it harms,” said John Marlow, assistant vice president, AIA Southwest Region. “Insurers' use of credit is not only regulated by the state of Arkansas but by federal law as well. Most state laws have strong consumer protections in place while allowing insurers the ability to more accurately assess risk and set pricing.”
In 2003 the Arkansas General Assembly passed Act 1452 to regulate the use of credit in calculating premiums for personal lines of property-casualty coverage. The act requires insurance companies to submit detailed information to the Arkansas Insurance Department, which in turn makes it public in annual reports.
Act 1452 also includes several strong consumer safeguards to protect Arkansas consumers, including the requirements that insurers:
* not use credit information as a sole basis for calculating premiums;
* use recent credit reports that have been calculated within 90 days of the date on which the policy is first written or renewed;
* not rely on credit reports that are based on gender, race, marital status or religion;
* not use credit scores based on zip code;
* notify consumers whenever their credit scores have been factors contributing to adverse action; and
* inform consumers that they have the right to obtain a free copy of their credit report from a credit bureau.
“Interestingly, the Arkansas report also showed that nearly 40 percent of Arkansas insurers do not use credit information in setting rates. This shows the market provides a number of choices for consumers who prefer to buy coverage where credit information is not considered by the insurer," continued Marlow.