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The Impact of Credit-Based Insurance Scoring on the Availability and Affordability of Insurance

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The Impact of Credit-Based Insurance Scoring on the Availability and Affordability of Insurance THE IMPACT OF CREDIT-BASED INSURANCE SCORING ON THE AVAILABILITY AND AFFORDABILITY OF INSURANCE HEARING BEFORE THE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS SECOND SESSION MAY 21, 2008 Printed for the use of the Committee on Financial Services Serial No. 110–113 ( VerDate Aug 31 2005 17:22 Aug 28, 2008 Jkt 043699 PO 00000 Frm 00001 Fmt 6011 Sfmt 6011 K:\DOCS\43699.TXT TERRIE THE IMPACT OF CREDIT-BASED INSURANCE SCORING ON THE AVAILABILITY AND AFFORDABILITY OF INSURANCE VerDate Aug 31 2005 17:22 Aug 28, 2008 Jkt 043699 PO 00000 Frm 00002 Fmt 6019 Sfmt 6019 K:\DOCS\43699.TXT TERRIE THE IMPACT OF CREDIT-BASED INSURANCE SCORING ON THE AVAILABILITY AND AFFORDABILITY OF INSURANCE HEARING BEFORE THE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS OF THE COMMITTEE ON FINANCIAL SERVICES U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS SECOND SESSION MAY 21, 2008 Printed for the use of the Committee on Financial Services Serial No. 110–113 ( U.S. GOVERNMENT PRINTING OFFICE 43–699 PDF WASHINGTON : 2008 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Aug 31 2005 17:22 Aug 28, 2008 Jkt 043699 PO 00000 Frm 00003 Fmt 5011 Sfmt 5011 K:\DOCS\43699.TXT TERRIE HOUSE COMMITTEE ON FINANCIAL SERVICES BARNEY FRANK, Massachusetts, Chairman PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama MAXINE WATERS, California DEBORAH PRYCE, Ohio CAROLYN B. MALONEY, New York MICHAEL N. CASTLE, Delaware LUIS V. GUTIERREZ, Illinois PETER T. KING, New York NYDIA M. VELA´ ZQUEZ, New York EDWARD R. ROYCE, California MELVIN L. WATT, North Carolina FRANK D. LUCAS, Oklahoma GARY L. ACKERMAN, New York RON PAUL, Texas BRAD SHERMAN, California STEVEN C. LATOURETTE, Ohio GREGORY W. MEEKS, New York DONALD A. MANZULLO, Illinois DENNIS MOORE, Kansas WALTER B. JONES, JR., North Carolina MICHAEL E. CAPUANO, Massachusetts JUDY BIGGERT, Illinois RUBE´ N HINOJOSA, Texas CHRISTOPHER SHAYS, Connecticut WM. LACY CLAY, Missouri GARY G. MILLER, California CAROLYN MCCARTHY, New York SHELLEY MOORE CAPITO, West Virginia JOE BACA, California TOM FEENEY, Florida STEPHEN F. LYNCH, Massachusetts JEB HENSARLING, Texas BRAD MILLER, North Carolina SCOTT GARRETT, New Jersey DAVID SCOTT, Georgia GINNY BROWN-WAITE, Florida AL GREEN, Texas J. GRESHAM BARRETT, South Carolina EMANUEL CLEAVER, Missouri JIM GERLACH, Pennsylvania MELISSA L. BEAN, Illinois STEVAN PEARCE, New Mexico GWEN MOORE, Wisconsin, RANDY NEUGEBAUER, Texas LINCOLN DAVIS, Tennessee TOM PRICE, Georgia PAUL W. HODES, New Hampshire GEOFF DAVIS, Kentucky KEITH ELLISON, Minnesota PATRICK T. MCHENRY, North Carolina RON KLEIN, Florida JOHN CAMPBELL, California TIM MAHONEY, Florida ADAM PUTNAM, Florida CHARLES A. WILSON, Ohio MICHELE BACHMANN, Minnesota ED PERLMUTTER, Colorado PETER J. ROSKAM, Illinois CHRISTOPHER S. MURPHY, Connecticut KENNY MARCHANT, Texas JOE DONNELLY, Indiana THADDEUS G. McCOTTER, Michigan ROBERT WEXLER, Florida KEVIN McCARTHY, California JIM MARSHALL, Georgia DEAN HELLER, Nevada DAN BOREN, Oklahoma BILL FOSTER, Illinois ANDRE´ CARSON, Indiana JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel (II) VerDate Aug 31 2005 17:22 Aug 28, 2008 Jkt 043699 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 K:\DOCS\43699.TXT TERRIE SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS MELVIN L. WATT, North Carolina, Chairman LUIS V. GUTIERREZ, Illinois GARY G. MILLER, California MAXINE WATERS, California PATRICK T. MCHENRY, North Carolina STEPHEN F. LYNCH, Massachusetts EDWARD R. ROYCE, California NYDIA M. VELA´ ZQUEZ, New York RON PAUL, Texas MICHAEL E. CAPUANO, Massachusetts STEVEN C. LATOURETTE, Ohio CAROLYN MCCARTHY, New York J. GRESHAM BARRETT, South Carolina RON KLEIN, Florida MICHELE BACHMANN, Minnesota TIM MAHONEY, Florida PETER J. ROSKAM, Illinois ROBERT WEXLER, Florida KEVIN McCARTHY, California (III) VerDate Aug 31 2005 17:22 Aug 28, 2008 Jkt 043699 PO 00000 Frm 00005 Fmt 5904 Sfmt 5904 K:\DOCS\43699.TXT TERRIE VerDate Aug 31 2005 17:22 Aug 28, 2008 Jkt 043699 PO 00000 Frm 00006 Fmt 5904 Sfmt 5904 K:\DOCS\43699.TXT TERRIE C O N T E N T S Page Hearing held on: May 21, 2008 ..................................................................................................... 1 Appendix: May 21, 2008 ..................................................................................................... 57 WITNESSES WEDNESDAY, MAY 21, 2008 Hunter, J. Robert, Director of Insurance, Consumer Federation of America ..... 32 Keiser, Hon. George J., Representative, State of North Dakota, on behalf of the National Conference of Insurance Legislators (NCOIL) ........................ 17 McCarty, Hon. Kevin, Insurance Commissioner, State of Florida, on behalf of the National Association of Insurance Commissioners (NAIC) .................... 15 Neeson, Charles, Senior Executive, Personal Lines Products, Westfield Group, on behalf of Property Casualty Insurers Association of America ..................... 38 Parnes, Lydia B., Director, Bureau of Consumer Protection, Federal Trade Commission ........................................................................................................... 14 Poe, Eric, Chief Operating Officer, Cure Automobile Insurance ......................... 36 Powell, Lawrence S., Ph.D., Professor, University of Arkansas at Little Rock .. 42 Pratt, Stuart K., President, Consumer Data Industry Association ..................... 40 Rice, Lisa, Vice President, National Fair Housing Alliance ................................ 34 APPENDIX Prepared statements: Carson, Hon. Andre .......................................................................................... 58 Hunter, J. Robert .............................................................................................. 59 Keiser, Hon. George J. ..................................................................................... 101 McCarty, Hon. Kevin ........................................................................................ 112 Neeson, Charles ................................................................................................ 168 Parnes, Lydia B. ............................................................................................... 173 Poe, Eric ............................................................................................................ 181 Powell, Lawrence S. ......................................................................................... 193 Pratt, Stuart K. ................................................................................................ 214 Rice, Lisa ........................................................................................................... 233 ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD Watt, Hon. Melvin: Information from the Web sites of AllState, State Farm, and Travelers Insurance Companies on what factors they consider in determining rates ............................................................................................................... 245 USA Today article entitled, ‘‘Credit scores’ link to insurance rates tested’’ 251 Responses to questions submitted to J. Robert Hunter ................................ 252 Responses to questions submitted to Lydia Parnes ....................................... 254 Responses to questions submitted to Eric Poe ............................................... 257 Responses to questions submitted to Lawrence S. Powell ............................ 272 Miller, Hon. Gary: Letter from the American Insurance Association, the Financial Services Roundtable, the Independent Insurance Agents and Brokers of Amer- ica, the National Association of Mutual Insurance Companies, and the U.S. Chamber of Commerce .................................................................. 279 Statement of the National Association of Mutual Insurance Companies .... 280 Statement of Michael J. Miller and EPIC Consulting ................................... 289 (V) VerDate Aug 31 2005 17:22 Aug 28, 2008 Jkt 043699 PO 00000 Frm 00007 Fmt 5904 Sfmt 5904 K:\DOCS\43699.TXT TERRIE VI Page Miller, Hon. Gary—Continued Statement of the Property Casualty Insurers Association of America ........ 294 ‘‘The Use of Occupation and Education Factors in Automobile Insurance,’’ State of New Jersey, Department of Banking and Insurance, dated April 2008 ...................................................................................................... 296 VerDate Aug 31 2005 17:22 Aug 28, 2008 Jkt 043699 PO 00000 Frm 00008 Fmt 5904 Sfmt 5904 K:\DOCS\43699.TXT TERRIE THE IMPACT OF CREDIT-BASED INSURANCE SCORING ON THE AVAILABILITY AND AFFORDABILITY OF INSURANCE Wednesday, May 21, 2008 U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. The subcommittee met, pursuant to notice, at 10:03 a.m., in room 2128 Rayburn House Office Building, Hon. Melvin L. Watt [chair- man of the subcommittee] presiding. Members present: Representatives Watt, Gutierrez, Waters, Green, Klein, Boren; Miller, McHenry, Royce, Barrett, Roskam, and McCarthy. Ex officio present: Representative Bachus. Also present: Representative Lynch. Chairman WATT. This hearing of the Subcommittee on Oversight and Investigations of the Financial Services Committee will come to order. I will recognize myself for 5 minutes or less for an opening state-
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