Massachusetts Codifies Credit-Based Insurance Scoring Ban Into Law

Massachusetts has enacted a new law that prohibits underwriters from using credit scores when issuing private passenger automobile insurance in the state.

The new prohibition on credit-based insurance scoring, which was signed by Gov. Deval Patrick recently, essentially codifies into law a regulation that has been in place in the state for some time.

Massachusetts insurance agents have been calling on the state legislature to enact such a ban for years, arguing the majority of state residents support a ban on credit-based insurance scoring.

The Massachusetts Association of Insurance Agents had been working to collect signatures from state residents in order to get a credit scoring ban on the upcoming election ballot in 2012. MAIA has supported past measures that would base auto premiums on consumers' driving records and years of experience behind the wheel.

The organization recently released a survey showing that more than 63% of Massachusetts' voters would be inclined to vote to support a law banning the practice and 83% said they didn't think credit scores should factor into an auto insurance rate (Best's News Service, Oct. 7, 2011).

But industry representatives contend that credit scoring has a long history of being a good way for insurers to determine risk.

"We support the ability of insurers to use appropriate tools in their underwriting practices, including tools like credit scoring," said Frank O'Brien, a vice president for state government relations at the Property Casualty Insurance Association of America. "Since the long-standing regulatory ban wasn't going to change, the passage of the law doing the exact same thing essentially changes nothing, including our continued support of credit scoring in Massachusetts."

More than half of U.S. states have adopted laws or regulations based on a model law by the National Conference of Insurance Legislators. The NCOIL insurance scoring model protects consumers in states that choose to allow the practice. The 26-state model requires disclosure and use of updated, accurate credit data; bans consideration of certain personal information; mandates filing of scoring models; and prohibits data selling, among other things (Best's News Service, Oct. 2011).

The top five writers of private passenger auto insurance liability in Massachusetts in 2010, according to BestLink, which provides online access to A.M. Best's database of insurance information. were: Mapfre North America Group, with 27.43% market share; Safety Group, with 11.46%; Liberty Mutual Insurance Cos., with 10.88%; Arbella Insurance Group, with 9.07%; and Plymouth Rock Cos., with 5.95%.

(By Jeff Jeffrey, Washington Correspondent: jeff.jeffrey@ambest.com)