"High risk vs. low risk"

The following is an excerpt from a January 21, 2005 Waco Tribune-Herald Letter to the Editor

We could not agree more with the Trib statement that "insurance rates should be based on insurance matters" [Editorial: "No to credit scoring," Jan. 12]. In fact, Texas law requires that insurance companies develop rating systems that charge lower-risk people lower premiums and higher-risk people more. In this way, lower-risk behavior does not subsidize high-risk behavior.

But since credit scores have been shown scientifically to be directly related to risk, they must be a part of a fair rating system. When risk is identified, rates are more accurate and incentives exist to actually reduce risk.

Credit information is only a part of the system. Many other factors are used. Furthermore, in 2003, the Texas Legislature passed stringent consumer protections regarding insurers' use of credit.

Insurers cannot deny policies solely on the basis of credit. Insurers must provide exceptions for consumers who experience extraordinary circumstances like death of a spouse, catastrophic injury or identity theft.

The Trib's recommendation that credit no longer be used would require lower-risk Texans to pay more for insurance while higher-risk Texans would pay less. How is this a fair result for Texas ?

Beaman Floyd, Executive Director
Texas Coalition for Affordable Insurance Solutions