House Committee on Business Affairs and Labor (04/17/2006)

Final
STAFF SUMMARY OF MEETING

HOUSE COMMITTEE ON BUSINESS AFFAIRS AND LABOR

Date:	04/17/2006	ATTENDANCE

Time:	01:36 PM to 03:12 PM	Balmer	X
		Borodkin	X
Place:	HCR 0107	Butcher	X
		Carroll M.	X
This Meeting was called to order by		Coleman	*
	Representative Marshall	Knoedler	X
		Liston	X
This Report was prepared by		McCluskey	X
	Christie Lee	Paccione	X
		Penry	X
		Welker	X
		Cerbo	X
		Marshall	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
SB06-109		Amended, Referred to Appropriations

01:36 PM -- Senate Bill 06-109

Representative Butcher, prime sponsor, presented Senate Bill 06-109. She distributed amendment L.009 that would prohibit the insurance carrier from using a credit score for underwriting purposes unless the insurer demonstrates non-discriminatory credit scoring methodology (Attachment A). Representative Butcher stated that the bill would not allow an insurer to use a credit score that is unfairly discriminatory. The bill defines unfairly discriminatory as adverse decisions resulting from the use of a credit scoring methodology disproportionately affect persons based upon race, color, religion, marital status, age, gender, income, national origin, or place of residence. Representative Butcher moved amendment L.009, seconded by Representative Carroll, for the purposes of discussion because it would ultimately become the bill if passed.

01:42 PM

Representative Butcher explained that based on zip codes, insurance rates are higher. There was committee discussion about the meaning of a credit score and what it represents. Representative Marshall mentioned that discrimination is already against the law and asked how these companies would prove that they do not discriminate. Representative Paccione asked Representative Butcher to clarify what score the bill is talking about and that it is not a persons "credit score" rather it is one's "insurance score." There was a committee discussion about what the bill addresses that current law does not. Representative Marshall suggested that the bill should address people who have no credit and a lower score versus someone with credit and a bad credit score.

02:01 PM -- Michele Strub-Heer, representing Progressive Insurance, testified against the bill and distributed a handout (Attachment B). She discussed why insurance companies use credit scores. She said that accurate pricing ensures that all drivers are insured and that no applicant is denied. Ms. Strub-Heer stated that under current law, insurance companies cannot use the factors set out in the bill anyway and cannot base rates solely on credit score. She explained that a credit score is used as the fourth highest factor in determining rates behind driving record, age, and gender. She responded to Representative Marshall's previous concerns about people with no credit and read the statute that already covers that issue. Ms. Strub-Heer discussed how Progressive already must disclose why a consumer did not get the very best rate. Ms. Strub-Heer responded to questions from the committee. Ms. Strub-Heer explained how rates were determined before the use of credit-scoring.

02:17 PM

Ms. Strub-Heer was asked how an insurance company would prove that it was not discriminating against someone who said they were discriminated against due to race or religion. She stated it would be very difficult to prove because the insurance companies do not ask for that information and therefore do not know. Representative Paccione asked how this type of legislation in other states has impacted Progressive. She stated that she is unaware of any state that actually bans using this type of information but rather adds consumer protection. Ms. Strub-Heer concluded her testimony and stated that Progressive makes much of its information public.

02:31 PM -- Doris Stipech, State Farm Agent, testified in opposition to the bill and distributed a handout (Attachment C). Ms. Stipech responded to committee questions.

02:39 PM -- Bill Imig, representing the Property and Casualty Insurance Association, testified against the bill. He emphasized that with amendment L.009, since companies do not collect data on race, religion, or ethnicity, it is impossible for companies to comply with the bill. Mr. Imig talked about a study that was done in Texas that addresses the correlation between credit scores and risk and disparate impact. He also mentioned an age study done in Virginia. Mr. Imig stated that all the studies have concluded that there is a correlation between credit score and risk. Mr. Imig responded to questions from the committee. Mr. Imig explained that insurance companies are prohibited from basing rates solely on one factor.

02:46 PM -- Norma Garcia, senior attorney for Consumer's Union, testified in support of the bill. She stated that insurance needs to be fairly priced because everyone needs it. She explained how credit scoring hurts consumers and how credit scores are based on consumer's credit files and one in four are inaccurate enough to change affect their rate. She listed reasons why someone's credit report would be inaccurate including identity theft. Ms. Garcia stated that discounts in rates are funded by those who do not qualify for them via a surcharge. Ms. Garcia explained that amendment L.009 says that if insurance companies use credit scoring, they must show that they are not discriminating. She stated that credit scores are banned in California and Hawaii for auto insurance. Ms. Garcia responded to questions from the committee.

02:55 PM -- There was committee discussion about how the bill would be enforced. Representative Carroll talked about possibly amending the bill to clarify what would count as compliance by the insurance company.


BILL:	SB06-109
TIME:	02:58:48 PM
MOVED:	Butcher
MOTION:	Moved amendment L.009 (Attachment A). The motion passed on a 7-6 vote.
SECONDED:	Carroll M.
		VOTE
	Balmer	No
	Borodkin	Yes
	Butcher	Yes
	Carroll M.	Yes
	Coleman	Yes
	Knoedler	No
	Liston	No
	McCluskey	No
	Paccione	Yes
	Penry	No
	Welker	No
	Cerbo	Yes
	Marshall	Yes
Not Final YES: 7 NO: 6 EXC: 0 ABS: 0 FINAL ACTION: PASS


BILL:	SB06-109
TIME:	03:11:30 PM
MOVED:	Butcher
MOTION:	Moved to refer Senate Bill 06-109, as amended, to the Committee on Appropriations. The motion passed 7-6.
SECONDED:	Coleman
		VOTE
	Balmer	No
	Borodkin	Yes
	Butcher	Yes
	Carroll M.	Yes
	Coleman	Yes
	Knoedler	No
	Liston	No
	McCluskey	No
	Paccione	Yes
	Penry	No
	Welker	No
	Cerbo	Yes
	Marshall	Yes
Final YES: 7 NO: 6 EXC: 0 ABS: 0 FINAL ACTION: PASS

3:12 PM

The committee adjourned.