Oregonians to Vote on Credit-Based Insurance Coverage

by Mike Bevel, CollectionIndustry.com

The fray over whether or not insurers can use credit scores to set auto and homeowner rates has moved to the Pacific Northwest ? Oregon, specifically; The Valentine State, home of Crater Lake.

On Nov. 7, Oregonians will become the first voters in the U.S. to decide whether to bar insurers from setting premiums based on such factors as credit history, debt load and bill-paying habits.

Coming as no surprise, the insurance industry would like to keep that particular practice up, and opposes the measure. It?s an important ballot item: what happens in the 33rd state could set the stage for other states in the union.

The battle comes as the use of credit scores ? 92% of insurers factor them into auto rates, Conning Research & Consulting says ? is under scrutiny elsewhere.

According to USAToday:

• The Michigan Court of Appeals will decide whether insurers can use credit scores to set rates. The state insurance department had barred such use of the scores, but its ban was struck down by a state judge.

• The U.S. Supreme Court has agreed to review lawsuits that complain that insurance companies failed to inform consumers that low credit scores led to higher rates. The lawsuits argue that failure to do so violated the Fair Credit Reporting Act.

• Oregon lawmakers in 2003 barred the use of credit scores to set rates for consumers with existing insurance policies. Measure 42 on the Nov. 7 ballot would go further by banning the use of credit scores in calculating rates for new customers.

The industry argues that eliminating credit-based scoring would likely mean that people with good credit would end up paying higher insurance rates.

Insurers also argue that people with low credit scores are likelier to file insurance claims. “People who manage their finances well tend to also manage other important aspects of their lives responsibly, such as driving a car,” the Insurance Information Institute says.