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NAIC Criticized Over Credit Score Issues

By Sally Maison
Published: Saturday, November 21st, 2009

The National Association of Insurance Commissioners was criticized by several consumer advocacy groups for not having done enough regarding credit-based insurance. Advocates say while state regulators have listened to the side of insurers, they have failed to recognize the sentiments of consumers. But NAIC retorts that it has done well to serve the public and has addressed the credit score issues by continually seeking for information.

NAIC Criticized Over Credit Score IssuesThe Center for Economic Justice (CEJ), the Consumer Federation of America (CFA), and other consumer protection groups said in a joint statement that they have been calling out to NAIC for several years regarding credit-based insurance but it still has continually ignored consumers. The groups contend that the NAIC has listened to the claim of insurers that credit-based scoring is necessary in determining the risks level of policy holders but it has ignored the predicaments of consumers.

Advocates say it is very difficult for consumers these days to do well with their credit score, especially that they have just undergone the worst economy the United States has seen in decades. The group adds that instead of responding actively to the problems of consumers, all NAIC has done was to hold public hearings.
The groups say the NAIC cannot expect consumers to have strong credit ratings since many of them have become victims of medical and economic catastrophes. They also cite predatory practices of lenders and banks as another huge reason why Americans are struggling with their credit.

Advocates further say that instead of responding promptly to issues affecting policyholders, the NAIC is taking another year to study what a credit score is. The groups comment that state insurance departments should have been regulating the issue which has been going on for decades now. They add that if state regulators are serious regarding the matter, they will use their resources to come up with a solution by March next year.

Meanwhile, the NAIC says it has done its best to protect consumers and challenges the claim of consumer groups that they are ignoring issues affecting policyholders. Representatives say the commission is having an aggressive schedule regarding the matter and is doing its best to determine how far insurers can use credit scores in pricing policyholders.

State regulators tell consumers that they are not going to sacrifice accuracy in exchange of haste and its taking its time to properly solve credit-based insurance scoring. Regulators also say they are hearing both advocates and insurers to come up with a fair decision.

NAIC representatives further retort that the economic crisis has help consumers become more financially responsible and some states are showing improvement with their average credit score.

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