There were raging debates earlier over the use of credit scores by auto insurance companies, while determining the rates on policies and they seemed to have ended some time ago. However, that does not seem to be the case as the battle over the use of credit scores continues.
It was assumed that this issue had been resolved four years ago, when the state insurance commissioner had banned the use of credit scores, but that seems to be far from the truth. The issue is back in the limelight and this time around, it would be the voters who would be deciding the outcome and not the state bureaucrat.
The Massachusetts Association of Insurance Agents (MAIA) has filed a ballot question that will take the ban on such socioeconomic factors and turn it into a state law. As of now, an individual’s occupation, credit scores, or education should not be taken into consideration while underwriting auto insurance policies – there are regulations on this. However, this is not a permanent solution and not sufficient to satisfy the agents’ association.
This ballot question in fact, reflects a bill that the independent agents have been actively pursuing on Beacon Hill, and the group still prefers a legislative approval instead of the ballot campaign. The group will have to gather around 70,000 signatures for the 2012 ballot, in order to get over the huge hurdles and that is not going to be very easy.
The insurance agents would be putting themselves in an ugly situation that could lead to a lot of fights between the major insurance companies and the agents. This ballot question debate is likely to lead to a lot of friction between the two groups. Although agents sell the auto insurance policies to customers on behalf of the insurance companies, they don’t really see eye-to-eye on matters such as public policies – especially this one.
NonnieBurnes, who is the former insurance commissioner, had hoped to quell this raging debate, four years ago by crafting an intricate system to shift the auto insurance industry, which was highly regulated into something that is more loosely controlled – which she called ‘managed competition.’
However, consumer advocates had been upset since Burnes didn’t put a formal ban on using credit scores in those plans. Hence, Burnes ensured that it was there before she got the final draft done.
The MAIA feels that a person’s driving records must be taken into consideration while underwriting policies and not a person’s socioeconomic background.
