Massachusetts Passes Law Banning Credit Scoring for Auto Insurance Policies

The state of Massachusetts has established a new law which bans insurance underwriters from considering credit scores when people in the state apply for private passenger auto insurance. It was recently signed into law by Governor Deval Patrick, but it hasn’t changed anything in the state, since there has been a regulation banning credit scoring in the auto insurance industry in place in the state for several years.

The law, then, merely makes the ban on credit scoring official and permanent, and it comes at the behest of the Massachusetts Association of Insurance Agents (MAIA), which had been working to collect signatures in order to place the issue on next year’s election ballot. Historically, MAIA has supported measures that require auto insurance premiums be based on an applicant’s driving record and years of driving experience, instead.

Recently, MAIA released the results of a survey, which showed that more than 63% of the state’s voters would be inclined to support a law such as the one just enacted, which bans credit scoring for automobile insurance, while 83% of those surveyed said they didn’t think credit scores should affect insurance rates.

Other industry representatives, however, maintain that there is a long history supporting credit scoring as a good way for insurers to determine risk. One such person is Frank O’Brien, a vice president for state government relations at the Property Casualty Insurance Association of America (PCIAA), who pointed out that passing a law to do the same thing a regulatory ban already does doesn’t change anything, “…including our continued support of credit scoring in Massachusetts.”

While Massachusetts is one of a very few U.S. states to have banned credit scoring outright, more than half of the rest of the states have regulations or laws in place that are based on a model provided by the National Conference of Insurance Legislators (NCOIL). That model protects consumers in credit-scoring-friendly states by:
– requiring disclosure and use of updated, accurate credit data,
– disallowing the consideration of certain types of personal information
– requiring that scoring models be filed
– prohibiting the selling of data.

Despite the thought that the law doesn’t change anything in Massachusetts, most of the legislators who voted for it believe it will benefit consumers in their state.