USA Today is carrying an article today highlighting Measure 42 in Oregon.
On Nov. 7, Oregonians will become the first voters in the USA to decide whether to bar insurers from setting premiums based on such factors as credit history, debt load and bill-paying habits.
The insurance industry, which opposes the measure, is pumping millions of dollars into an ad campaign to defeat it. The outcome will be closely watched by other states that could come under pressure to take similar steps if the Oregon ballot measure succeeds.
That sets the general tone of the article, which seems decidedly biased in favor of Measure 42.
There’s two passages in particular that merit comment:
The industry argues that eliminating credit-based scoring would likely mean that people with good credit would end up paying higher insurance rates. But [Consumers Union attorney] Garcia notes that in California, insurance rates have dropped since the use of credit scores was banned.
The thing is…credit scoring has never been permitted in California auto insurance rates, under Prop 103. Recent rate drops have been more a result of regulatory prodding to get the industry to recognize recent trends and reduce rates despite their reluctance to do so in a challenging regulatory environment.
Insurers also argue that people with low credit scores are likelier to file insurance claims. “People who manage their finances well tend to also manage other important aspects of their lives responsibly, such as driving a car,” the Insurance Information Institute says.
Consumers Union says there’s no proof of that. A review of how credit scores are used to set rates in Texas found that the scores have more to do with economic status than with personal responsibility, says Birny Birnbaum, a former Texas insurance regulator who is executive director of the Center for Economic Justice, a consumer advocacy group.
The correlation between scoring and future losses has been demonstrated in hundreds of rate filings around the country and several published studies, including this one commissioned by the Texas Department of Insurance and performed by the University of Texas.