UTAH CREDIT SCORING LAW TAKES EFFECT

Utah’s new law restricting insurers’ use of credit-based insurance scores to “initial underwriting” and discounts took effect May 6. The state Insurance Department had asked insurers to comment on key provisions to be included in a regulation being drafted to implement the law.

National Association of Independent Insurers (NAII) Counsel Ann Weber suggested “initial underwriting” should be defined as “the process of deciding whether or not to issue a policy to the consumer, the amount and terms of coverage, the duration of the policy and the rates and fees charged.” She said that wording would conform to a Federal Trade Commission commentary that has been endorsed by the U.S. Court of Appeals for the Fifth Circuit Court in Wiltilng v. Progressive, et al. The only departure from the FTC definition, she said, would be to delete a reference to renewal or cancellation of a policy, in accordance with the statutory restriction to “initial underwriting.” In addition, Weber suggested the regulation not include language on how insurers will use credit information to determine discounts, which is another area on which the department had asked insurers to comment. The department is empowered to enforce the legislation (House Bill 110), but enforcement “does not require commentary on the various discount methods that insurers may choose to implement in issuing discounts,” she commented.

“The language of the new law speaks for itself,” she said. “Therefore NAII respectfully requests that any rule issued by the department not include language involving the use of discounts which are clearly permissible per the new statute.” Weber requested that insurers be given a 120-day grace period after adoption of the regulation to give them adequate time to properly set up their in-house systems to comply with the new law and rule. Many companies will have to make significant changes that will be labor-and time-intensive, a process that cannot begin until the regulation is adopted, she noted.