As seen in Ins
urance Journal today:
New York lawmakers have passed legislation designed to
protect consumers against identity theft but insurers are urging Gov. George
Pataki to veto the measure because its credit freeze provision does not
exclude insurers.The legislation promises to give consumers a way to prevent identity
theft and protect themselves against cyber piracy, while also increasing the
penalties for those who commit identity theft. The package is highlighted by
legislation that would allow consumers to place a security freeze on their
credit, a move meant to prevent identity thieves from causing greater damage
to victims’ credit.[...]But the New York measure is the only credit freeze legislation passed in
the nation this year that does not exempt insurers. Nine other states have
passed credit freeze legislation in 2006 [...], and all of them allow
insurers to continue to access credit information for underwriting and other
legitimate business purposes, according to the Property Casualty Insurers
Association of America (PCI), which has asked Gov. Pataki to veto credit
freeze legislation.
The absence of an insurance exemption is not the best idea I’ve heard today.
Whereas other users of credit data use that information not only to decide
whether to accept or decline you, but they also feed the results of that
information back to the credit bureaus. In other words, it makes sense to
allow a consumer to freeze access to his/her credit data by a credit-card
issuer, in order to prevent someone else from getting a credit card (or a
loan, or…) that could feed back bad information to the credit file.
However, insurers, for the most part, use the data for
rating/underwriting…but they don’t feed data back to the credit bureaus.
An exception can be safely made, even if it’s narrow enough that only a
score is being retrieved, rather than an entire credit file.
That being said, the extra hassle that would be caused for an insurer by the
lack of an exception in freeze legislation is not that great in the grand
scheme of things. Heck, I bet that I could even rate off of whether a
“freeze” result were returned…..