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Gallagher Creates Task Force to Examine Insurers’ Use of Credit Reports


TALLAHASSEE - Florida Treasurer and Insurance Commissioner Tom Gallagher today announced the creation of a special task force to examine insurance companies' use of credit reports in underwriting automobile and homeowners' insurance policies. An increasing number of insurers are using credit history, or the lack of one, when deciding whether to offer coverage, renew an existing policy or offer a preferred rate. Gallagher cited concern with insurers denying coverage or hiking up rates based solely on credit reports.

"Insurance companies typically look at your age, driving record and claims history before deciding whether to sell you coverage or how to calculate your premium," Gallagher said. "As the use of credit reports becomes more popular with insurers, it's important that we consider the impact on insurance consumers. An overemphasis on credit history could make it harder for some Floridians to purchase auto or homeowner's insurance."

Under the federal Fair Credit Reporting Act, credit reports can be used for insurance underwriting. If credit history played a role in an insurance company's decision to deny coverage, the Act requires the insurer to inform the consumer and supply the name of the credit bureau that provided the information.

However, third-party credit scoring systems that analyze credit reports for insurers are not covered by law. "The specific factors used by these companies in calculating credit scores are not available to the public," Gallagher said. "It's impossible to know what the correlation is between credit history and potential risk without looking at the data and methodology used."

Gallagher said a majority of consumers may not even know that their credit history was a factor in denied insurance or the rate they were quoted. Of 65 complaints on this topic received by the department over the last year, 49 were from consumers whose insurance was cancelled and 16 from those who were denied outright over credit issues. Some said their credit information was incorrect, but the coverage was denied anyway.

In many cases, the consumers stated they had clean driving records and had never missed a payment on their premiums. Other consumers said their applications for insurance were denied because they were too young to have established a credit history, were disabled and earned less than the $12,000 considered "financially stable" by insurers, paid cash for major purchases, had been confused by the insurer with another person, or because they had been denied by a previous insurer.

Some consumers said they believed they were being discriminated against as members of a low-income group. Others said their privacy had been invaded.

Gallagher has called on legislators, consumer advocates and concerned citizens to serve on the task force. Task force members include:

Bill O'Neil, Chair, Attorney, Sarasota
State Senator Bill Posey, Rockledge
State Representative Leslie Waters, Largo
David "Birny" Birnbaum, Executive Director, Ctr. for Economic Justice, Austin, TX
Elsie Crowell, Insurance Consumer Advocate, Tallahassee
Yolanda Williams, Consumer, St. Petersburg
Rick Combs, Insurance Agent, Winter Park

Three hearings to solicit public input will be held across the state. Dates and locations will be determined in the coming weeks. Gallagher expects the task force to develop recommendations for potential legislation and/or department rule by December 2001.

Consumers who suspect that their credit history played a role in denied or more expensive insurance coverage should take the following steps:

· Ask the insurance company if it uses credit reports as a determining factor.

· Obtain a copy of your credit report. Credit reporting agencies include: Experian (800/682-7654), Equifax Credit Information Services (800/685-1111), and Trans Union Corporation (800/916-8800).

· When your report arrives, make sure it's accurate. If you find a mistake, ask for a correction from the credit bureau. By law, the credit bureau must respond to your request within 30 days.

· If you've been denied insurance, appeal. Ask the insurance company to put the reason in writing.

"If you think you have been denied coverage unjustly or have been unfairly placed in a higher risk category, contact the department's Consumer Helpline at 1-800-342-2762," Gallagher said.