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State bill would ban credit scoring to set premiums

Times wire services

California Insurance Commissioner John Garamendi has cracked down on the use of credit scoring by one insurance company that writes homeowner policies in the state.

Garamendi announced last week that he has reached an agreement with Allstate Insurance Co. to stop what the industry calls “insurance financial scoring” or the use of any other credit scoring method in the underwriting of its homeowner policies.

“It is my strong belief that any factor used to set premium rates should be a predictor of future claims. Credit scoring simply does not meet this criterion,” Garamendi said.

“Most critically, credit scoring has great potential to be discriminatory against protected classes: minorities and women.”

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The Foundation for Taxpayer and Consumer Rights in Santa Monica is sponsoring SB 691, introduced by Sen. Martha Escutia (D-Whittier), which would ban the use of credit scoring by insurers to underwrite, cancel or renew homeowner policies.

The bill has cleared the California Senate and will be considered by the Assembly some time in June.

Garamendi said the measure is needed to better protect consumers.


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