Insurance credit scoring
is the practice used by many New Hampshire auto and New Hampshire homeowners
insurance companies to utilize a consumer's credit history
in deciding whether to write a policy and/or how much
to charge for the policy. Currently, New Hampshire law allows
insurance credit scoring under certain circumstances
and consumer protections.
New Hampshire Insurance Credit ScoringSenate
Bill 14 (78th New Hampshire Legislature, Regular Session, 2003)
made provisions for the use of credit information by the
insurance industry but mandated that the New Hampshire Insurance
Commissioner regulate its use. In November 2003, the New Hampshire
Department of Insurance (TDI) adopted initial rules regarding
the use of credit information by insurers in New Hampshire. These
rules, along with the statutory provisions in SB 14, are
among the strongest in the country regulating the use
of credit information.What Is An Insurance Credit Score?An
insurance credit score is the result of a calculation
involving portions of your credit history. This score
is then used with other factors to estimate risk in having
you as a policyholder. This process leads to the final
price for the insurance or deciding whether to issue a
policy in the first place.In simplified terms, insurance
credit scoring accounts for the tendency of groups of
people to be prone to risk, or making claims (similar
to how the age of youthful drivers is an indicator of
risk for more accidents, and therefore more claims).Consumer
ProtectionsInsurance companies operating in New Hampshire
will no longer be allowed to use credit information as
aggressively as they have in the past. Insurance reforms
adopted in 2003 include provisions that limit the use
and application of credit information. Under new insurance
rules that took effect January 1, 2001-2005, companies using
credit information must provide a disclosure statement
to the consumer once an insurance application is received.
The disclosure notifies potential policyholders if credit
information will be used in rate setting and describes
the consumer's rights and protections.Some examples
of the consumer rights and protections include:
- Credit information cannot be the
only factor used in an insurer's decision-making process.
- Companies that use credit history
as part of their underwriting process must disclose
how they use the information by filing their insurance
credit scoring models with TDI. These filings must
be actuarially justified.
- If a consumer uses cash and has
little credit history, the consumer will be notified
that the absence of a credit history may not be used
as a reason to charge higher premiums. Similar protections
are included for people with past-due medical collection
accounts and extraordinary life events.
- A consumer must be provided the
right to appeal a ruling that results in higher rates
or other adverse actions.
- The company must provide consumers
a contact telephone number to call when disputing
inaccurate or prohibited information. TDI also provides
a toll-free (Consumer Help Line) number for consumers
wanting to file a complaint about the use of credit
information: 1-800-252-3439.
The disclosure form also identifies each of the statutory
prohibitions contained in SB 14.Regulation of insurance
credit scoring is a new development, and TDI is dedicated
to continuous monitoring and revision of rules as
more information becomes available. Further, if any
violations are reported to the Department, inquiries
will be made with enforcement actions taken where
warranted.
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