Last week I mentioned that anti-scoring rules issued last year in Florida had been overturned. The usual industry news sources were filled with sound-bites from pleased trade association reps.
I happened to notice that the Florida Office of Insurance Regulation has issued its own press release on the subject.
“After reviewing the decision I am pleased that the Administrative Law Judge agreed that the Governor and Cabinet do have the authority to prohibit the use of credit scoring if it unfairly discriminates,” said McCarty, “and that he disagreed with the claim of the petitioners that we did not have the authority to define unfair discrimination in anything other than actuarial terms. While he felt that the definition used was too vague, he clearly found that the Governor and Cabinet had the authority to define ‘unfair discrimination’ as it relates to the use of credit scoring in terms of having a disproportionate impact on certain protected classes if the definition was less vague.”
In other words, “expect new rules shortly”. The debate is not done.
I’m painfully aware that certain large insurers disagree with my opinion on the subject, and I’ll admit that perhaps I am too naïve here… but I think it’s long past time that the industry quit playing the see-no-evil/speak-no-evil/hear-no-evil game when it comes to the question of scoring and “unfair discrimination”.
One of the biggest problems with the “unfair discrimination” monster, at least from my perspective as a pricing and product-design kind of guy, is that the term is rather abstract. Depending on who you talk to, it’s either a vague concept (kind of like the legal definition of pornography, which is essentially “I know it when I see it”), or it’s a complex legal construct with boundaries drawn with little practical relationship to how personal insurance business operates.
If the industry dared to broach the subject, and work with regulators to come up with a practical definition of “unfair discrimination”, it should be possible to prove beyond reasonable doubt that scoring is not unfairly discriminatory.
Sadly, with the nature of the American legal system, the industry can’t even openly consider the remote possibility that scoring could be unfairly discriminatory, lest it be tackled by an army of class-action attorneys.
(And it’s also why I need to re-remind readers that my writings here are my opinions, and not those of any employer present or past…and that my writings should not necessarily be considered official actuarial opinions…they’re just the ramblings of a strange guy who thinks too much. (Danged lawyers.))
It’s amazing how some good…or at least not-necessarily-bad…ideas to protect consumers can be perverted into legal and logical monstrosities all through the magic of bureaucracy and threat of litigation, isn’t it?