Florida Regulator Flaunts Law, Seeks to Impose Credit Rule

24 May 2006

The Florida Office of Insurance Regulation is making an end run around Florida law by seeking to implement a credit-based insurance scoring rule that is currently being challenged in state court, according to the Property Casualty Insurers Association of America.

The OIR notified insurers that it intends to enforce the provisions of the controversial rule effective Sept. 1. The rule was originally proposed in 2004 to implement the provisions of legislation enacted in 2003 that is based on the National Conference of Insurance Legislators model insurance scoring act. The proposal went beyond the requirement of the law by requiring insurers to document the affects of insurance against demographic information not collected by, or available to, insurers.

In March 2005, PCI, and other insurance trade associations filed suit against the Department of Financial Services, Office of Insurance Regulation and the Financial Services Commission. The petition challenged the specific provisions of the rule as contrary to statute, and also addressed the fact that, following reorganization of the Department of Financial Services, the OIR relied on statute for promulgating the rule that did not give the OIR the authority to do so.

"This is an illegal act that is unenforceable," William Stander, PCI assistant vice president and regional manager, said. "It is a sad day when the state's regulatory body flaunts the authority of the legal system and runs roughshod over due process rights. We will do everything possible to prevent them from enforcing this illegal rule."

Florida's law is in the mainstream regarding how states regulate insurers' use of credit information. But with the OIR interpretation, Florida is in essence banning insurance scoring by making compliance extraordinarily difficult, if not impossible. The rule would require insurers to demonstrate that the use of the credit-based information does not have a disproportionate affect on "persons of any race, color, religion, marital status, age, gender, income, national origin, or place of residence.

However, studies have been conducted that demonstrate that insurance scores are objective and when used along with other familiar factors such as driving record and the age of a home or type of vehicle, help provide a clearer picture of an individual's risk of loss. This helps insurers personalize the insurance coverage by more accurately pricing the policies based on the individual policyholder's potential for filing a claim.

"The bottom line is that insurance scoring helps to lower insurance premiums for most consumers, which makes insurance coverage more available and affordable," Stander said. "This rule does not protect consumers; it harms them by violating the law and disrupting the marketplace."

Source: insurancejournal

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