Consumers, Credit, and Choice

Summary consumer position on credit scoring…

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.

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 passed the test of time and competition and 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 policyholders.

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.

State legislatures and insurance regulators should be very careful when considering imposing restrictions on the use of credit reports as an underwriting tool. Time and competition have proven credit reports to be an efficient and accurate tool for selecting and classifying risks, and restricting their use would result in higher underwriting costs for insurers and higher premiums for policyholders.

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