SB 55 would harm Alaska consumers

To the editor:

Senate Bill 55, sponsored by Sen. Mike Dunleavy’s (R-Wasilla) Senate Labor and Commerce Committee, would allow insurance companies to use your financial credit score to justify charging you more for auto, home, life and related insurance plans. Senator Dunleavy’s bill to allow credit score insurance surcharges could take away hundreds of dollars per year from Mat-Su Valley residents.

Our credit scores are set by three multi-national corporations’ calculation of our worthiness to receive bank loans. However, their credit scoring process is frequently inaccurate, even by the standards of the confidential “black boxed” procedure these corporations use to judge you. If they score your credit inaccurately, it can be extremely difficult to dispute your 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 percent of the time. Still, if this credit score insurance surcharge bill passes, insurance companies are now free to use this single number to jack up a price that is supposed to reflect what kind of driver or homeowner you 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 already have an existing law preventing credit score surcharges at policy renewal, when insurance companies have the information they need to charge you an appropriate price for your policy. Unlike states with even more strict rules, Alaska also 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 the consumer is confident enough that his or her credit score is in fact accurate and will get a better insurance rate. This policy 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.

An early hearing for Senate Bill 55 in Senator Dunleavy’s Labor and Commerce Committee invited only insurance company executives and lobbyists to testify about the bill. I hope Alaskans take the opportunity to protect their pocketbooks by calling their state senators and representatives to oppose this legislation.

Chaz Rivas

Anchorage