Texas Consumers Benefit from Credit-Based Insurance Scoring
The following statement can be attributed to Beaman Floyd, executive director of the Texas Coalition for Affordable Insurance Solutions

Texas consumers benefit from credit-based insurance scoring because most policyholders pay less when insurance scoring is used. Credit information is predictive of loss experience, which is why insurers consider it in the underwriting process. While credit is only one of many factors considered when assessing risk and setting individual premiums, it is a useful objective tool based on proven actuarial principles.

The legitimacy of credit scoring by insurers was carefully examined during the 2003 Legislative Session and it was determined that Senate Bill 14 would allow the continued use of credit scoring by insurers. Moreover, the legislation provided a strong set of new consumer protections, including:

• Insurers are prohibited from computing a credit score using factors that constitute unfair discrimination.
• Insurers are prohibited from denying, canceling, or declining to renew a personal insurance policy solely on the basis of credit information.
• Insurers are prohibited from taking an action that results in an adverse effect against a consumer solely because the consumer does not have a credit card account.
• Insurers are prohibited from considering an absence of credit information or an inability to determine credit information in underwriting or rating a policy, except under certain circumstances.
• Under the law and upon written request, insurers will provide exceptions to their use of credit information for consumers who experience certain extraordinary life circumstances such as catastrophic injury, death of a spouse or identity theft.

Insurers must implement these rules to ensure a transition to a competitive market by December 2004. Ultimately, the responsible use of credit-based insurance scoring helps provide fair and accurate insurance premiums for Texas consumers.

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