Congress to Hear FTC Report on Credit-Based Insurance Scores on Friday

The debate over the Federal Trade Commission (FTC) report on credit-based insurance scores between both its supporters and detractors will get further fueled by Friday’s hearing on the matter by Congress.  
 
Consumer interest groups feel that the report by the FTC is virtually “meaningless” due to the way in which the data was compiled. They say it’s “insurance industry propaganda.” Insurance industry groups, however, have identified real benefits to both carriers and the majority of consumers. According to the study, 59% of the population would actually pay less for their premiums over 41% who may pay more.  
 
Here’s some of what the detractors have to say:  
 
According to Allen Fishbein of the Consumer Federation of America, “The FTC’s approach to collecting data for the analysis is like the federal government trying to do a study on the health impacts of tobacco use with data selected by tobacco companies for the study. By relying on handpicked data, the insurance industry was unnecessarily given opportunity to control the outcome of the study.”  
 
Birny Birnbaum of the Center for Economic Justice stated: “Despite finding no explanation for the alleged connection between insurance scores and losses, the FTC report somehow concludes credit scoring is valid and good for consumers. This is not an impartial analysis, but simply advocacy for insurers.”  
 
The supporters of the report obviously feel otherwise as indicated in press releases issued by the AIA and PCIA:  
 
“The FTC’s study confirms what we have long professed, and many previous studies have shown, credit-based insurance scores help refine insurance pricing to better reflect an individual’s risk profile. We believe scores reduce subsidization of bad risks by good ones, meaning most consumers pay less for insurance,” said David Snyder, AIA vice president and assistant general counsel. “The report is very detailed and requires more thorough analysis, but the FTC’s initial conclusion says it all – ‘credit-based insurance scores are effective predictors of risk under automobile policies.’ ”  
 
The issue has been studied at both the state and federal level. Repeated demands for more studies are according to Snyder, “Advocacy run amok.”  
 
“What the FTC found in this report is that the only impact on demographic groups was minimal – and may well have been statistical anomalies, according to Snyder. He said, “There’s no intentional discrimination because insurers don’t use and collect demographic data – and that was confirmed by the FTC.”  
 
The Property Casualty Insurers of America (PCIA) concurs. According to interim PCI CEO June Holmes, “Now there should be no doubt about the value of using this highly predictive underwriting and rating tool. Using credit information makes underwriting and pricing more accurate and results in many consumers paying less for their automobile and homeowners insurance policies. Consumers want to pay a fair price for insurance that matches their risk of loss. To achieve the goal of pricing based on an individual’s risk of loss; insurers simply want to use the most accurate, statistically valid tools available and credit information has proven to be one of the best predictors of loss. With these findings, legislators and regulators should be very comfortable with insurers’ use of insurance scoring.”  
 
The crux of the issue right now is the connection between using credit scores to evaluate risk. Does it have merit? Consumer groups feel that the FTC Report has tainted, worthless data. They also say that it’s biased and discriminates against ethnicity and race. Others disagree. Why should banks and creditors be able to tell consumers what to pay based on credit, while the insurance companies are penalized for using credit-ba