Florida Restrictions on Credit Scoring Overturned

As seen at Insurance Journal:

A Florida Administrative Law Judge has declared that the Florida Office of Insurance Regulation’s rule restricting the use of credit information by insurers is invalid.

In a Dec. 29 ruling, Judge Lawrence P. Stevenson of the Florida Division of Administrative Hearings blocked the OIR from restricting insurers in how they may base their underwriting and pricing decisions on potential customers’ credit scores.

OIR filed its rule in March 2005 to implement the credit law passed by the Florida Legislature in 2003. That law, based on a National Conference of Insurance Legislators’ model, authorized insurers’ use of credit information and credit scores in underwriting and rating.

The IJ article doesn’t spell it out completely clearly, but the OIR’s rule was a back-door ban on scoring, requiring insurers to prove that their implementation of scoring didn’t have a disparate impact on protected groups.

That proof is something that can really only be done using data insurers are barred from collecting, and at an industry level, rather than the state-mandated per-company proof.

Since the requested support information can’t be generated, the rule ends up effectively being a ban on scoring. Thus the legal challenge from the industry.