The Wisconsin Senate dismayed insurance interests yesterday bypassing a bill that would ban the use of customer credit records toset an individual's auto or home insurance rates. The bill now goesto the state Assembly.

Insurance groups said they would continue to battle the measure.The 17-to-15 vote for approval in the Senate was primarily on partylines, with 16 Democrats and one Republican voting for the measure,and 14 Republicans and one Democrats voting against.

In the Assembly, Republicans hold a majority. Greg LaCost,assistant vice president and regional manager for Property CasualtyInsurers Association of America, noted the narrow margin for thebill's passage in the Senate and said, “we are confident that theHouse will reject the notion of raising rates for the majority ofconsumers.”

The action in Wisconsin follows a vote this week by the Coloradolegislature, which defeated a proposal to ban credit scoring. Atpresent, only four states have some form of ban on thepractice–California, Hawai, Massachusetts and Maryland.

Delaware passed a restriction last year on the use of creditscores for renewal business, unless requested by the consumer. Mostother states allow credit scoring, with many following a modelcreated by the National Conference of Insurance Legislators.

Both the American Insurance Association and National Associationof Mutual Insurance Companies testified against the Senate bill(259) when it was in committee.

“Banning a proven risk-classification tool such as credit willonly serve to harm the Wisconsin insurance market, where consumerspay some of the lowest auto and property insurance premiums in thenation,” said John Birkinbine, AIA assistant vice president for theMidwest Region.

After the vote, Robert Detlefsen, NAMIC's vice president ofpublic policy, in a statement called the bill “a sure path tohigher rates, as consumers who handle their finances responsiblywould have to subsidize rates for the minority of customers withpoor credit.”

“Supporters of this legislation have clearly ignored themultitude of studies showing that credit-based insurance scoring isan objective and actuarially valid tool that enables insurers tobetter predict the likelihood of future claims and the cost ofthose claims,” he added.

Mr. Detlefsen said he would continue fighting the legislationand lobby the Assembly vigorously to defeat it.

Mr. Birkinbine of AIA said that “as we testified to both theSenate and Assembly committees, credit information helps insurersmore accurately assess and price for an individual's risk, therebyreducing subsidization of bad risks by good ones, making the systemfairer for everyone.”

Studies have proven that consumers with better credit scoresgenerally file fewer claims and have lower insurance losses,industry groups say, arguing that credit information is completelyobjective and “blind” to legally prohibited factors such as race,religion, marital status and nationality.

On top of state and federal consumer protection laws, insuranceregulators are required to ensure that consumers are not chargedrates that are “excessive, inadequate, or unfairlydiscriminatory.”

The property-casualty industry in Wisconsin employed more than18,000, and paid more than $144.8 million in premium taxes in2005.

Additionally, insurers are a major source of capital forgovernmental bodies in the state. According to an analysis of A.M.Best data, insurers held $6.9 billion in Wisconsin municipal bondsin 2005–approximately 20 percent of the outstanding state and localgovernment debt in the state.