Fwd: Florida Set to OK Credit-Insurance Link

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Misty L. Trepke

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Florida Set to OK Credit-Insurance Link

 

http://consumeraffairs.com/news03/fla_ins.html

 

Florida Set to OK Credit-Insurance Link June 16, 2003 Florida lawmakers have

given their blessing to a bill that legalizes the practice of linking insurance

premiums to credit ratings. The industry-backed bill now goes to Gov. Jeb Bush,

who is expected to sign it. The practice of charging higher insurance premiums

to consumers with poor credit ratings is highly controversial but is not

specifically addressed by the laws of most states. Consumer advocates call it a

" new way of red-lining " while the insurance companies contend most policyholders

will save money because of it. " I was fuming when I found out. It should be

unconstitutional! " said Fritz of Delray Beach in a complaint to

ConsumerAffairs.Com.

 

A few states, including California, Maryland and Hawaii, prohibit the practice.

State lawmakers overwhelmingly passed the bills, sponsored by Sen. Lesley

Miller, D-Tampa, during last month's special legislative session. If Bush signs

the bills as expected, they'll take effect Jan. 1. Consumer advocates say that

credit histories are an unfair way to set rates or to decide whether to offer

coverage.

 

Insurers counter that credit ratings provide a highly reliable way to predict

how many claims policyholders will file -- although they admit they're not sure

exactly why. The first of the proposed laws lets carriers use consumers' credit

histories to set rates or deny coverage, so long as it's not the only reason for

such a decision.

 

As a nod to consumers, a policyholder whose credit rating suffers as the result

of a job loss or death of a spouse could appeal a rate hike or nonrenewal. The

second bill mandates that the math behind credit scoring is a " trade secret " and

will be hidden from public scrutiny. Sam Miller, spokesman for the Florida

Insurance Council, called the twin bills " very fair. " Most policyholders benefit

from insurers' use of credit scoring, he said, because most consumers have

strong credit scores. What it means for consumers in Florida and other states

where credit-scoring is permitted, is that it's more important than ever to be

vigilant about maintaining a good credit score.

 

 

 

 

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