Legislature neglects addressing many health care issues

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In its legislative session ending May 17, the Missouri legislature passed a bill designed to protect consumers from being denied insurance coverage based on credit scoring. Credit scores, or insurance scores, are numbers assigned to consumers based on credit reports or credit information and designed to assess insurance risk.|ret||ret||tab|

If signed by Gov. Holden, House Bill No. 1502 would limit an insurance company's use of credit scoring, said John West, president of Rebsamen Insurance, 1111 S. Glenstone Ave. Missouri is one of at least 20 states that have enacted or are working on some form of legislation to address credit scoring, West said. "The House approved the bill overwhelmingly, and it passed through the Senate relatively unchanged," he said. "I'm confident it will be signed by the governor."|ret||ret||tab|

According to Randy McConnell, spokesman for the Missouri Department of Insurance, Holden initially proposed a general approach, restricting the use of a credit score as the primary factor in underwriting or setting rates. While this bill does not address all of the governor's concerns, McConnell said, "it is the first step toward the kind of consumer protection that is needed."|ret||ret||tab|

The bill does not address rates, he said, but it does limit the use of credit scores in terms of denying coverage or not renewing existing policies when they expire. The bill would require another factor besides the insurance score to be considered in underwriting. |ret||ret||tab|

The use of credit scoring has become widespread in the past few years for homeowner's and automobile policies, West said. "We are receiving our share of complaints. Unfortunately, probably nine out of 10 companies right now are using credit scoring in some way, shape or form."|ret||ret||tab|

Dennis Breckenridge, president of Breckenridge Insurors Inc., 1334 S. Glenstone Ave., said that six of the seven companies he works with use credit scoring. "Not that many years ago, for auto insurance, I'd ask how many tickets they'd had. Now I ask for their Social Security number and birth date, because the first thing I've got to do is check their credit score."|ret||ret||tab|

Each of the six companies rates the scores differently, Breckenridge said. "It drives us crazy; there's no conformity at all." |ret||ret||tab|

To complicate things further, companies generally require slightly higher scores for property insurance than for auto insurance, so some people will qualify for one but not the other.|ret||ret||tab|

West said he understands why insurance companies use credit scoring. "As a broker, we see both sides of the coin," he said. "They're just trying to find some way to determine if they're going to have a loss." |ret||ret||tab|

In 2001, the property and casualty insurance industry lost money for the first time ever. "A lot of it's attributed to 9-11," he said. "However, they had seen diminishing returns since about 1998."|ret||ret||tab|

Breckenridge said insurance companies tell him consumers with bad credit "tend to have more claims and they tend to be larger claims. There just seems to be a correlation between bad credit and the amount they get on claims."|ret||ret||tab|

On the other hand, West said, "you look at the flip side, and you just can't broad brush like that. You may have somebody who goes through a divorce, and creates a financial hardship. That doesn't make them any more likely to have a claim."|ret||ret||tab|

Those with no credit history, such as senior citizens and farmers, can also be adversely affected by credit scoring. "If you have no credit, and they try to pull your credit history and there's nothing there, they could make the decision to not offer you insurance," said West.|ret||ret||tab|

McConnell said the formulas used to compute credit scores are kept secret. "It becomes a guessing game for the consumer. One of the difficulties is to somehow make this information available, so that we could look at how these models are put together," he said. |ret||ret||tab|

One thing that is known, he said, is that credit inquiries are used in the formulas. "Any time you inquire into credit or something that uses credit as a factor, that damages your credit score." Under the provisions of House Bill No. 1502, this would change, as insurance inquiries could no longer be used to negatively affect insurance scores or credit reports.|ret||ret||tab|

"The other thing that is very important here is many insurers do not inform people why they are turned down," McConnell said. "Under the Federal Fair Credit Reporting Act, if you are turned down or if your premium increases, you are entitled to a free credit report." |ret||ret||tab|

In addition to the free credit report, individuals also are entitled to know the reasons coverage was denied, McConnell said. The insurer must explain how to obtain the credit report, he said, and notify the applicant of the right to lodge a dispute with the consumer credit reporting agency. In addition, he said, "If you are disputing some part of your credit report, it can't be used against you." |ret||ret||tab|

The bill does not apply to complaints received in the past, McConnell said, and it will only apply to contracts entered into on or after July 1, 2003. |ret||ret||tab|

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