Scoring Discrepency

Because of concerns that the National Association of Insurance Commissioners' (NAIC; Kansas City) recommendations may lead to amendments in legislation that could restrict carriers' use of credit scores for underwriting purposes, the Property Casualty Insurers Association of America (PCI; Des Plaines, Ill.) has expressed opposition to the NAIC's recently released Insurance Scoring Best Practices document.

"The NAIC is going back and hashing out terms related to insurance scoring, and this isn't timely since most states have enacted legislation related to insurance scores," says Lynn Knauf, policy manager, PCI. "The train has left the station and we are past [the best practices] point. The NAIC has implemented a document that reads like a wish list of how they'd like the NCOIL (National Conference of Insurance Legislators) model to read."

PCI supports the NCOIL model, which was created in November 2002 and allows insurers to use credit information while providing consumer safeguards in the areas of disclosure, sole use and no-hits. According to PCI, 19 states have enacted legislation based on the NCOIL model.

PCI charges that - although the NAIC's Best Practices document states that its purpose is to "identify important issues and recommend the best regulatory practices, and it's not intended to amend current law," according to Knauf - "another purpose listed in the document is for the recommendation of change to statutes of regulation," she adds. "That is a concern because this document takes a very restrictive tone."

For example, notes Robert Zeman, PCI's senior vice president, industry and regulatory affairs, the definition of adverse action embraced by the document is overly broad and would amend current law and create new requirements for insurers.