Consumers, Credit, and Choice:

Legislators and regulators should not be skeptical of the development of better and more efficient underwriting tools, nor should they create barriers for their use. This is especially true of credit reports, which have been shown to be a cost-effective, accurate underwriting tool for insurance companies. Restricting credit history information as an underwriting tool would result in higher costs for insurers and higher premiums for consumers.

• Consumers can benefit from credit scoring and cost effective ways insurance companies and can lower the price of premiums or facilitate the inclusion of consumers who otherwise would be too expensive to underwrite.

• If consumers, legislators and regulators want to improve the affordability and availability of insurance, they should encourage the use of instruments that help insurers make more accurate underwriting decisions.

• If the State takes over rate and underwriting control by banning the use of credit information, it will be like handcuffing a mime.

• Companies need to use tools to predict future losses, allowing good risks to pay lower rates—and we want to “handcuff” them? Without credit checking all of us will end up paying higher and higher prices for insurance, and not just those who would be considered bad risks.

• Some legislators have expressed concern that credit reporting bureaus information is often inaccurate. But we as consumers have responsibility to make sure our credit reports is accurate as the reports are used in many of our personal financial dealings.

• Consumers should not fear – and legislators should not limit – use of credit scoring in setting insurance rates.

Markets only work if government steps aside. We don’t need more regulation. We need more competition. If you want lower pricing in insurance, find a way to encourage more creative approaches to a number of issues – the policy forms, the use of policy language, deductibles, as well as in building codes and materials.

Texas is taking a first step by setting up the Texas FAIR Plan for consumers who can’t get homeowners insurance. But it will take competition to drive down rates—nothing else will work.

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Texas Citizens for a Sound Economy (Texas CSE)…over 25,000 organized Texans committed to preserving our economic freedoms; and to enhancing consumer choices in the marketplace.