The credit-based insurance scoring controversy continues with the latest volley coming from the Maryland Insurance Administration (MIA). In January, MIA released a report indicating that the data it had collected in 2003 was insufficient to conclusively determine if credit scoring has an adverse impact on low-income or minority populations.Last month, Insurance Networking News reported that a recent study conducted by the Missouri Department of Insurance found that minorities and low-income populations are harmed by insurers use of credit-based insurance scores (see March 2004, page 8).

The Maryland Insurance Administration (MIA) came to the conclusion that its data was insufficient, in part, because insurers do not collect information regarding an applicant's race or income. In addition, no analysis regarding the correlation between credit scoring and other rating factors exists, the report states.

Also, neither race nor income is considered in the development of insurers' credit scoring models, according to the report.

This recent conclusion contradicts a 2002 analysis of credit scores within eight ZIP codes in the Baltimore metropolitan area.

That earlier study suggests that as the percentage of minorities increases and the percentage of households with incomes greater than $40,000 decreases, there is a corresponding decrease in the percentage of people with high credit scores.

However, the MIA report points out that insurers and third-party vendors have revised their credit scoring models to bring them into compliance with legislation passed by the Maryland legislature after the 2002 study was conducted. "Thus, it would be difficult to determine if the legislation or some other factors brought about the differences seen when comparing the 2002 (data) and the 2003 (data)," the report states.

In 2002, responding to concerns from consumers, regulators and policymakers, the Maryland legislature passed House Bill 521.

That law prohibits homeowners' insurers from using credit history to refuse to underwrite or rate a risk. It also prohibits auto insurers from using credit history to refuse to underwrite a risk or increase a renewal premium.

The Maryland law also restricts the manner in which an insurer may use credit history to rate a new policy-and prohibits insurers from considering certain factors for establishing an insurance score.

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