Credit score could not be used to determine insurance rates under OK bill

Show Caption

A Senate panel on Thursday passed a measure that would prohibit insurance companies from using credit information in determining rates.

Senate Bill 1435, by Senate Minority Leader Julia Kirt, passed the Business and Insurance Committee by a vote of 5-3.

“Someone with a spotless driving record but poor credit could end up paying more for car insurance than someone who is a neighbor who has multiple accidents but spotless credit,” she said.

Two neighbors with the same type of house could get charged very different insurance premiums solely based on a credit score, Kirt, D-Oklahoma City, said.

More: What will Oklahoma Senate tackle this session? Senate leader on insurance rates, sports betting

Credit history is a factor in determining interest rates for things such as credit cards and home and vehicle loans. A credit score is a numerical number that considers certain factors, including payment history, amount of credit and debt.

Sen. Brian Guthrie, R-Bixby, asked if there were any states that banned the use of credit scores that resulted in reduced rates.

While some states have banned the use of credit scores, those measures were part of broader reforms, so it would be difficult to say if it results in reduced rates, Kirt said.

“Oklahomans are paying more than 100% more for their home insurance if they have a bad credit score in the state – and I don’t mean really bad, just a mildly bad credit score,” she said.

It results in a penalty for low income individuals even if they don’t have higher weather or claim risks, Kirt said.

“And they are conflating those two things – credit risk with a risk on the insurance side and I don’t see the data backing up for that,” Kirt said.

Opponents say using credit score to determine rates saves drivers money

The American Property Casualty Insurance Association, a national property casualty association, opposes the bill.

In a letter, provided by Kirt’s office, Walter R. Gonzales, assistant vice president for state government relations, said the bill would force safe, low-risk drivers to subsidize those who are at a higher risk.

“Data shows that credit-based insurance scores save consumers 30% to 59% on average,” he wrote. “Most consumers either benefit from the use of credit or are unaffected by it.”

The scores capture long-term behavior patterns that strongly correlate with claim frequency and severity, he wrote.

Forty-seven states allow it, he wrote.

The measure passed with its title stricken, a legislative maneuver to slow the process down.

Action on two other Kirt measures dealing with insurance costs were delayed at the request of committee Chair Bill Coleman, R-Ponca City.

Coleman said he laid over the two other bills, Senate Bill 1438 and Senate Bill 1444, because one of the panel members with insurance industry expertise was absent.

The American Property Casualty Insurance Association also opposes the other two measures that were put on hold.

Oklahoma Voice is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Oklahoma Voice maintains editorial independence. Contact Editor Janelle Stecklein for questions:info@oklahomavoice.com. Follow Oklahoma Voice onFacebook andTwitter.