INSURANCE CREDIT SCORING RESTRICTED

The Iowa Insurance Division is proposing new rules to restrict the use of credit scoring by insurance companies. More and more insurers are using credit scoring to decide whether and at what price to offer coverage.

Therese Vaughan, the Iowa Insurance Commissioner, said there is a correlation between low credit ratings and higher claims, but the reasons are unclear. Insurers believe that if one is good/bad at managing bill paying and credit, then one also tends to be good/bad at managing other areas of life, making one claim prone.

The Insurance Division has recently proposed new rules to add restrictions on credit scoring. They are based on model language from the National Conference of Insurance Legislators (NCOIL). The new rules will apply only to personal insurance. This includes private vehicle, homeowners and other noncommercial lines of coverage.