Reform Auto Insurance, Agents Tell State Pols

NU Online News Service, July 31, 3:58 p.m. EST? An independent agent's association is urging state legislators toreevaluate auto insurance regulations and not to put a ban on theuse of credit scores.

The president of the Alexandria, Va.?based Independent InsuranceAgents & Brokers of America outlined this position toconference participants attending a panel discussion at theNational Conference of State Legislators in Denver, Colo.

"Many of the same inefficiencies and delays that arise in theregulation of life and commercial products also apply to theoversight of auto insurance," said Thomas B. Ahart, associationpresident and president of Ahart, Frinzi & Smith Insurance inPhillipsburg, N.J., in a statement. "It is an area wrought withinconsistent state requirements and excessive governmentinterference.

"Given the size and scope of the auto insurance market and itsbroad impact on society, its regulation is often politicized?andextensive automobile rate regulation is most often motivated by thepolitical desire to minimize insurance rates," he said.

Mr. Ahart said an April 2001 report on personal lines rateregulation was prepared by the American Enterprise Institute andthe Brookings Institution Joint Center for Regulatory Studies. Thestudy, he said, found state regulation of auto insurance does notdecrease prices for consumers, but instead reduces coverageavailability and increases price volatility.

The study said rate regulation often results in rate suppressionwhere the total amount of premiums collected is less than would becollected in an efficient and competitive market, IIABA said. Theassociation asserted that in New Jersey and Massachusetts, autoinsurers have left the markets because approved rates areinadequate.

Mr. Ahart said that insurers are left with no option but toleave the markets when they can not get adequate pricing. This hasinadvertently hurt consumers, he said. He cited South Carolina andIllinois as two states where positive reforms have led to aturnaround and could be used as models for other states.

The IIABA leader also addressed the use of credit scoring. Hesaid the controversy arose where some companies used credit datarigidly and exclusively in their underwriting and pricing ofinsurance policies. This has created suspicion among consumers.

While the association does oppose efforts to see a total ban ontheir use, Mr. Ahart said the industry should moderate its use ofcredit scoring so it ensures it is used in a "reasonable andconsumer-friendly way."