Senate Bill 55, sponsored by Sen. Mike Dunleavy’s (R-Wasilla) Senate Labor and Commerce Committee, would allow insurance companies to use our financial credit score to justify charging us more for auto, home, life and related insurance plans. Senator Dunleavy’s bill to allow credit score insurance surcharges could cost Alaska residents hundreds of dollars more each year than we already pay.
An early hearing for Senate Bill 55 in Senator Dunleavy’s Labor and Commerce Committee was by invitation only, and insurance company executives and lobbyists were the only people allowed to testify on the bill. Of course they urged its passage. At a later hearing, when the public was allowed to weigh in, every Alaskan who testified opposed SB 55 because it would raise costs for consumers.
Our credit scores are set by three multi-national corporations’ calculation of our worthiness to receive bank loans. However, the credit scoring process is frequently inaccurate, even by the standards of the confidential, “black boxed” procedure these corporations use to judge us. If they score our credit inaccurately, it can be extremely difficult to dispute our rating with these large bureaucracies when they make a mistake.
A study paid for by the Consumer Data Industry Association found credit scores contain errors almost 20% of the time. Still, if this credit score insurance surcharge bill passes, insurance companies will be free to use this single number to jack up a price that is supposed to reflect what kind of driver or homeowner we are.
Forty-eight states have some law or regulation concerning how credit scores can be used in insurance policy underwriting. In 2011 alone, 26 states introduced legislation to ban or further protect against credit score insurance surcharges. Georgia, Hawaii, Maryland, Oregon and Utah all have laws that ban the use of credit scores in certain insurance underwriting circumstances. And in 2012, the U.S. Congress considered a bill to protect consumers from using credit scores to justify charging drivers more for auto insurance.
Alaskans are fortunate enough to have an existing law that prohibits credit score surcharges at policy renewal, when insurance companies have the information they need to charge us an appropriate price for our policy. Unlike states with even stricter rules, Alaska has a compromise policy to permit insurance companies’ use of credit scores when they first rate a plan for a new customer.
Our current law even lets a consumer waive the prohibition against using her credit score at renewal if she is confident enough that her credit score is accurate and will result in a better insurance rate. This law allows insurance companies the flexibility they need to attract customers while protecting Alaskans from unfair surcharges on a product that, in the case of automobile insurance, we are mandated to buy.
We don’t need any more special-interest legislation to increase Alaskans’ financial uncertainty in a weak economy.
I urge Alaskans to call their state senators and representatives and tell them to oppose this legislation. We have regulations that work—there is no need to give insurance companies the opportunity to increase already burdensome rates.
• Metcalfe is Alaska’s Democratic National Committeewoman