Ban on Credit Scoring
Senate File 263
This proposal, Senate File 263 authored by State Senator Mary Olson, Bemidji, would ban insurers' from using credit scores or credit information in underwriting auto and homeowners policies. This proposal is strongly opposed by the insurance industry. The MIIA is also opposed to a credit scoring ban.
Insurers claim that about 80 percent of their policyholders either get a premium reduction or are not adversely affected by credit scoring. Only 20 percent of policyholders pay higher premiums because of poor credit.
Credit scores do not discriminate against lower income persons. Many middle class and wealthy Minnesotans have poor credit scores.
Minnesotans average credit scores are ranked either first or second in the country depending on which indexed is cited. Overall, Minnesotans fare well under a system employing credit scoring.
Insurers do not use credit scores to raise more revenue through premiums. If credit scoring is banned, overall premium revenue will remain the same, it will just be allocated differently.
Minnesota law already regulates the use of credit information. Insurers cannot use a credit score as the sole factor in underwriting. They must disregard credit scores if the policyholder does not use credit. Policyholders may ask insurers to rescore their credit if they think it is incorrect.
The Department of Commerce, numerous state regulatory agencies and the Federal Trade Commission all have deemed credit scoring non-discriminatory and realize the direct link between a low credit score and claims submissions.
Credit scoring is an effective and inexpensive underwriting tool. Its repeal will increase cost and lengthen the time needed for underwriting approval.
Please contact your State Senator and ask them to oppose Senate File 263 which would ban the use of credit scores in Minnesota. The bill will be before the Senate Commerce Committee on Tuesday.
You can locate your senator's phone and email at the following Web site: www.senate.leg.state.mn.us