September 20, 2007
Docket Clerk
Hearings and Appeals
Division of Insurance
One South Station
Boston, MA 02110-2208
Re: Submission of Written Testimony and Additional Commens
Docket No. G2007-07
Proposed 211 CMR 79.00 Private Passenger Auto Insurance Rates
Dear Docket Clerk,
Enclosed please find my written testimony for delivered at the September 20, 2007 public hearing on the above-cited proposed regulation on behalf of the Center for Economic Justice and the Consumer Federation of America.
In addition, I provide supplemental testimony with this letter in response to questions raised during the hearing.
First, in one question, the General Counsel suggested that Massachusetts law expressly permits insurers to use insurance scoring for underwriting auto insurance. My belief is
that there is no Massachusetts law with such express permission, but that insurance scoring is generally permitted by the federal Fair Credit Reporting Act. Further, the FCRA does not prohibit a state from banning or restricting insurers’ use of consumer
credit reports. Attached is a legal analysis on this issue. Further, the ability of states to restrict or ban insurers’ use of consumer reports is demonstrated by the insurance scoring bans or restrictions in many states. Finally, it is unclear why the Division believes it has the authority to restrict insurers’ use of consumer reports for rating, but not underwriting. In my view, the Commissioner clearly has the authority to ban the use of insurance scoring for risk classification – including underwriting, tier placement and rating.
Second, in another question, I was asked about two approaches to regulating risk classification factors – a list of permitted factors or a list of prohibited factors. As set out in my testimony, my belief is that the only way to protect consumers is to specifically
permit risk classification factors and that consumers cannot be protected from harm resulting from the use of arbitrary and unfair risk classification factors by simply listing prohibited factors. My experience is that insurers will routinely find new factors to serve as proxies for prohibited factors.
With regard to underwriting prohibitions, my testimony is that underwriting is not defined in the regulation, but that the regulation appears to intend underwriting to mean
denial of coverage as distinct from tier placement or rating. My suggestion is to simply identify any factor permitted for tier placement or rating that would be prohibited for denying coverage – geographic location appears to be the one factor identified for such treatment in the proposed regulation – and specifically state that such factor may not be
used in whole or in part to deny coverage by any insurance company including one or more insurance companies within an insurer group.
Finally, I enclose with my testimony some of my research on insurance scoring and request to participate in your deliberations on the use of insurance scoring.
Sincerely,
Birny Birnbaum
Executive Director
e-mail: birny@flash.net
(See attached for additional comments)
center-for-economic-justice-testimony-7-20-07.pdf