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Insurance Rate Overhaul Bans Credit Scores for Now

Oct 5, 2007


Insurance Commissioner Nonnie Burnes yesterday ordered an historic overhaul of the state's system for setting auto-insurance rates - but kept open the possibility that motorists' credit-report information could be used in the future to set premium prices.

Under Burnes' plan, a new "managed competition" system for auto insurance would be introduced next April, replacing the current setup in which regulators set specific rates that insurers can charge drivers.

The new system would give insurers wider latitude to set insurance premium prices, in the hope it will eventually spur more competition, reduce prices and give drivers more choices when selecting insurance policies.

In what Burnes called a "significant" change, the commissioner decided to impose a one-year ban on use of credit reports for both setting rates and for insurance underwriting. Her previous draft proposal called for only a one-year ban on use of credit reports for rates.

Burnes said officials will study the credit-report issue during a one-year "transition" period that runs through March 30, 2009.

Though she called the ban an "indefinite" one that could be extended beyond 2009, she acknowledged it's "not an official permanent" ban.

Steve D'Amato, a consultant to the Center for Insurance Research, said he's skeptical about whether insurers will try to get around the ban. Critics have said use of credit scores harm primarily the poor.

But a spokeswoman for Attorney General Martha Coakley, who had expressed reservations about Burnes' original draft proposal, said Coakley is "pleased" that Burnes extended the one-year ban on use of credit reports to insurance underwriting.

Originally published by By JAY FITZGERALD.

(c) 2007 Boston Herald. Provided by ProQuest Information and Learning. All rights Reserved.

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