Massachusetts insurance agents have come together to oppose the use of credit score and other socioeconomic factors when determine the cost of auto insurance. The Massachusetts Association of Insurance Agents (MAIA) will be campaigning to bring the matter before Congress, where the group hopes legislators will ban what they call a “discriminatory practice.” More than 1,400 agencies representing MAIA are currently mobilized to gather signatures from registered voters for a petition that will bear their concerns to lawmakers. The campaign has won the support of Attorney General Martha Coakley, who certified the petition.
Currently, Hawaii is the only state that has banned the use of socioeconomic factors in swaying the price of insurance coverage. Other states have passed laws that keep insurers from canceling policies based on these factors. Massachusetts agents hope to gain enough momentum to make sure more states consider banning the practice.
Insurers consider a multitude of factors when determining the price of insurance. For auto insurance, those factors could include age, driving history, medical background and the vehicle being driven. What decides the importance of these factors are studies done regarding what kind of risk these factors harbor. The potential cost of the risk is what insurers have to accommodate.
MAIA’s efforts may be for naught, however, according to the Massachusetts Insurance Federation. The state’s Insurance Commissioner has already instituted a ban on the use of credit score and other socioeconomic factors when pricing insurance.
Updated with commment on October 21, 2011: Statement from Massachusetts Insurance Federation Executive Director James T.Harrington re: S:461
The insurance industry in general and most Massachusetts Insurance Federation (MIF) members continue to assert that the use of credit information is a valuable tool in predicting potential loss, a belief that is reinforced by various federal and state studies. Yet, the Massachusetts Division of Insurance current regulations already prohibit the use of credit scoring for rating and underwriting of private passenger automobile insurance. For that reason the MIF, representing insurers who write a majority of private passenger automobile insurance in this state, conclude that any legislative action being contemplated is both unnecessary and redundant.
