Texas House Bans Credit Scoring in Regulation Bill

The Texas House of Representatives passed its version of Senate Bill 14, legislation that addresses regulation of residential property and commercial and personal automobile insurance. According to the Alliance of American Insurers, the House version contains significant differences from the Senate version, including a total ban on credit scoring inserted into a House floor amendment.

A conference committee consisting of members from each legislative body is expected to meet later this week to work out the details.

The Alliance expects the credit scoring provisions to generate significant debate. The Senate version of the bill allowed the use of credit history, with some restrictions.

The Alliance said it was successful in defeating several actions it considered to be “onerous,” including amendments pertaining to prior approval of all rate increases for auto and homeowners insurance and a mandated rate-rollback to push back homeowners insurance rates to their January 2001 levels.

In addition to the amendment to ban credit scoring in the underwriting or rating of personal automobile and residential property insurance, the House passed an amendment prohibiting an insurer from splitting a county into more than three rating territories with a 15 percent rate differential among those territories.

In an announcement on the House Web site, Rep. Ryan Guillen noted that constituents’ complaints about “sky-high insurance costs” were a big factor in the House’s push to deny the use of credit scoring in establishing rates.

Calling the ban a victory, Gullen added, “I can tell you that there was a lot of pressure from the insurance lobby after we voted to delete credit scoring, but most of the members agree that we just have not seen any good arguments that rates for home insurance or auto insurance should be based on a credit report.”