As if there wasn’t already enough bubbling in Florida’s insurance cauldron in the form of property insurance and PIP-related issues, it seems that there’s a desire to re-agitate Florida’s “love” of credit scoring. From the Daytona Beach News-Journal:
Worried about discrimination against minorities and poor people, state regulators are considering proposals that could place new restrictions on insurance companies that use credit scores to help set rates.[...]
[R]egulators, who held a hearing Thursday on two credit-score proposals, say they are concerned the practice disproportionately hurts groups such as blacks and Hispanics. Overall, those groups are more likely to have lower incomes than whites, which can lead to financial issues that affect credit.[...]
Among other things, one of the proposals would require insurers to keep statistical information to show credit scoring doesn’t disproportionately affect people based on race, ethnicity, income and zip code.
One of the problems with that idea, pointed out in the hearing, is that insurers don’t collect information on ethnicity and income. It’s taboo information, which insurers tend to be paranoid about coming into any contact with over the potential for accusations of overt pricing or underwriting accusation. Neither insurers nor consumer advocates really want insurers to even touch such knowledge with a 10-foot pole.
The other big problem with the idea is more subtle. As far as I know, terms like “disparate impact” or “disproportionately impact”, while they may have convoluted legal definitions, haven’t been cleanly translated into a sensible, measurable statistic.
I would argue that the test for a particular variable is to address the question of whether a particular group is paying more or less in a rating scheme that uses a particular variable than they would if a hypothetical rating system that didn’t rely on that information were used. It’s certainly a doable test, but building an unbiased data set to run that sort of a test would be challenging.
However, that’s just my opinion.
Without a clear definition of what’s to be measured and tested, there is a terrible risk that data collected could be biased, and/or could be abused and misinterpreted in ways unfair to one side or the other in this debate.
Expressing a desire to confirm claims (and my personal belief) that scoring isn’t unfairly discriminatory is admirable…but without guidelines being defined and agreed to, a simple legislative expression of that desire could be a nightmarish mess.