Multistate Credit Scoring Study On Track

By Michael Ha

NU Online News Service, June 7, 4:15 p.m.EDT?An ongoing multistate credit scoring study is on trackfor completion by the end of the year despite the withdrawal ofthree states from the initial list of 13 participants, according tothe Missouri Insurance Department, which is spearheading theeffort.[@@]

Commenting on the project, Missouri Insurance Departmentspokesman Randy McConnell said the study will produce acomprehensive analysis of auto and homeowners data from 10participating states, with an overall report to be written by thedepartment's head of statistics, Brent Kabler.

"Mr. Kabler is a very talented statistician?he was able toprovide the technical consulting that the states needed to get theproject off the ground."

Mr. McConnell also related that the scope of this multistateresearch will be much wider compared to the earlier MissouriInsurance Department study, which only examined credit scoring'simpact on minority and low-income households on a ZIP code-levelaggregate basis.

According to the earlier Missouri study, released in January,urban and rural state residents suffer from the use of creditscoring because in the lowest income areas?often in inner citiesand the southern portion of the state?the average credit scoreswere 12.8 points lower than the wealthiest ZIP code areas.

Mr. McConnell also explained that in the earlier research, "wehad companies submit to us ZIP code-level data that was essentiallyaggregate data." But in the new 10-state study, the Missouridepartment is suggesting the use of data at the policyholderlevel?these include not only credit scores but driving records, themodel numbers of policyholders' cars, and other information thatare in a typical underwriting and rating files.

"This report will also be looking at the actuarial relationshipbetween credit scoring and losses, as well as the economic impactof credit scoring on various groups. This will help us conduct amuch more in-depth analysis," he said. "There are about 20companies involved in the study in every state. Auto and homeownerspolicies are the subject of the data call."

The deadline for states to turn in the data is Aug. 20, and theMissouri Insurance Department will then analyze these numbers andgive the results to participating states and publish a final reportby the end of the year.

Currently, there are 10 states participating in the study, downfrom 13 several weeks ago. The states involved in the project are:Alabama, Indiana, Louisiana, Maryland, Missouri, Montana, Nevada,Oregon, Washington and West Virginia.

Among the initial 13 states, Kansas decided to drop out, Mr.McConnell said, because they expressed "confidentiality concerns,"whereas Wisconsin withdrew because of their "problems with staffcapacity" to handle the project. Michigan withdrew last month afterGov. Jennifer Granholm and Office of Financial and InsuranceServices Commissioner Linda Watters proposed a rule to ban theinsurers' use of credit scoring altogether.