INSURERS MUST CONSIDER SECURITY BREACH

Insurers who use credit scoring in underwriting and rate setting must take into consideration the recent security breach at ChoicePoint Inc., according to a bulletin issued by the Texas Department of Insurance.

TDI’s Commissioner’s Bulletin directs the industry not to penalize consumers who may have been impacted by the leak of their personal information from ChoicePoint. Legislation passed in 2003 protects Texas consumers from inaccurate credit information being held against them by insurance companies that rely on credit scores to set rates or determine whether or not to accept a new customer.

Protections regarding the use of credit scoring approved by the 78th Texas Legislature provide consumers with an opportunity to fix incorrect information on their credit reports that might negatively affect their ability to secure insurance coverage or incorrectly raise the cost of coverage. Insurers are required to provide exceptions for any credit information that might have an adverse effect on consumers if it relates to any one of several life changing events including catastrophic illness or injury, the death of a close family member, the loss of a job, a divorce, or as in this case, identity theft.

According to the law, consumers must make a written request for such an exception. But in the bulletin TDI said insurers should also accept verbal requests for credit exceptions related to the ChoicePoint incident and to be proactive in making contact with ChoicePoint on behalf of their customers or applicants for coverage.

Responding to TDI’s bulletin, Jerry Johns, president of Southwestern Insurance Information Service, said consumers should not worry about insurers in Texas penalizing customers who may have been affected by compromised computer security involving their credit histories.

He said the insurance industry strongly supported the 2003 legislation that created tough standards relative to the use of credit. Johns added, “Consumers in Texas can rest assured that insurers will adhere to the letter of the law.”