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home / insurance / in the media

Whittier Daily News
May 04, 2005

by Mike Sprague, Staff Writer

Committee OKs Calderon home insurance bill;

Credit scores would be factor in sale
The state Assembly Insurance Committee on a 6-0 vote Wednesday approved Assemblyman Ron Calderon's legislation allowing insurance companies to use credit scores in determining whether to sell homeowners insurance.

In California, the state Department of Insurance doesn't allow insurance companies to use credit scores in determining rates or even whether to sell policies.

AB 1464 received the minimum votes needed. Four Democrats chose not to vote. The bill next goes to the Assembly Appropriation Committee.

Calderon, D-Montebello, said most states already allow the use of such data and his bill includes many protections for consumers.

"This information will lead to a more competitive marketplace in which insurers will write more policies leading to better rates,' he said.

But consumer groups criticized the bill as a "scheme' to deny insurance to some people and raise rates, and even blasted Calderon for carrying the bill.

"Ron Calderon has turned his back on his community in order to serve the interests of the insurance community today,' said Doug Heller, executive director of Foundation for Taxpayer and Consumer Rights.

"It's ridiculous to base somebody's insurance premium on whether they have paid off their Visa card,' Heller said. 'Whether or not you pay your Visa bill on time every month has nothing to do with whether or not a windstorm is going to blow shingles off your roof.'

Sam Sorich, president of Association of California Insurance Companies, said a dozen studies show that there is correlation between the risk of loss and someone's credit score.

"The use of credit information helps to make homeowners insurance more available,' Sorich said. "The availability of this information encourages companies to write more insurance.'

Michael Gunning, senior legislative advocate for the Personal Insurance Federation, said the bill has protections, saying that insurance companies can't take into consideration income level, race, creed or color.

Reid McClaren, assistant chief counsel for the state Department of Insurance, said a study in Missouri found that the use of credit data produces lower scores for minorities and low- income people.
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Mike Sprague can be reached at (562) 698-0955, Ext. 3022, or by e-mail at mike.sprague@sgvn.com


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