Florida Set to OK Credit-Insurance Link

June 16, 2003
Florida lawmakers have given their blessing to a bill that legalizes the practice of linking insurance premiums to credit ratings. The industry-backed bill now goes to Gov. Jeb Bush, who is expected to sign it.

The practice of charging higher insurance premiums to consumers with poor credit ratings is highly controversial but is not specifically addressed by the laws of most states. Consumer advocates call it a "new way of red-lining" while the insurance companies contend most policyholders will save money because of it.

"I was fuming when I found out. It should be unconstitutional!" said Fritz of Delray Beach in a complaint to ConsumerAffairs.com.

A few states, including California, Maryland and Hawaii, prohibit the practice.

State lawmakers overwhelmingly passed the bills, sponsored by Sen. Lesley Miller, D-Tampa, during last month's special legislative session. If Bush signs the bills as expected, they'll take effect Jan. 1.

Consumer advocates say that credit histories are an unfair way to set rates or to decide whether to offer coverage. Insurers counter that credit ratings provide a highly reliable way to predict how many claims policyholders will file -- although they admit they're not sure exactly why.

The first of the proposed laws lets carriers use consumers' credit histories to set rates or deny coverage, so long as it's not the only reason for such a decision. As a nod to consumers, a policyholder whose credit rating suffers as the result of a job loss or death of a spouse could appeal a rate hike or nonrenewal.

The second bill mandates that the math behind credit scoring is a "trade secret" and will be hidden from public scrutiny.

Sam Miller, spokesman for the Florida Insurance Council, called the twin bills "very fair." Most policyholders benefit from insurers' use of credit scoring, he said, because most consumers have strong credit scores.

What it means for consumers in Florida and other states where credit-scoring is permitted, is that it's more important than ever to be vigilant about maintaining a good credit score.

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