INDIANAPOLIS – The Insurance Institute of Indiana received word that Indiana Attorney General Steve Carter has issued an opinion declaring a Department of Insurance bulletin regarding insurer use of credit oversteps its authority. According to the opinion, "Bulletin 123 places restrictions on insurers that were not intended by the General Assembly when it adopted P.L. 201-2003."
The bulletin in question, Department of Insurance Bulletin 123, was issued by Commissioner Sally McCarty in response to the enactment of Public Law 201 in 2003. The law prohibits insurers from denying, canceling or non-renewing personal insurance policies based solely on credit information. It also prohibits insurers from basing renewal rates solely on credit information.
The definition of solely came into question when Bulletin 123 was issued interpreting the statute to mean, "an insurer may not deny, cancel, decline to renew or increase a renewal rate due to a credit score unless at least one other rating factor has changed." Insurance Institute of Indiana President Stephen Williams said requiring other factors to change was never part of the consideration by the legislature.
"It was clearly the intention of the legislature to restrict the sole use of credit by insurers," said Williams. "However, the legislature only wanted to require insurers to consider at least one other factor, not require a change in that other factor."
The Institute first approached Commissioner McCarty to reconsider the interpretation expressed in the bulletin. When the Commissioner stated her intention to stand behind the interpretation, the Institute approached one of the legislators involved with crafting the law.
Williams asked State Representative Mike Ripley (R-Monroe) to seek an opinion from the Attorney General on Bulletin 123. Ripley agreed to submit the request. In his request, Ripley contended the bulletin places restrictions on insurers that were not intended by the General Assembly.
The Attorney General’s opinion, released this week, was consistent with the interpretation of Ripley and the Insurance Institute. The opinion states, "After a review of at least one other rating factor, the insurer may make the business decision it deems appropriate whether the credit score is the only demonstrable change in the calculation or not."
Williams said the insurance industry has been "forthright" in their efforts in dealing with the issue of credit. He said he hopes the Department of Insurance will be the same with the Attorney General opinion on the bulletin.
"It is up to the Commissioner to respect the legal opinion of the state’s elected attorney," Williams said. "The insurance industry, particularly member companies of the Institute, has made a good-faith effort to create an acceptable law. Now, in light of the Attorney General’s opinion, we hope the Commissioner will accept the legislature’s clear intent."
The Insurance Institute enrolled the assistance of the National Association of Mutual Insurance Companies (NAMIC), American Insurance Association (AIA) and Property Casualty Insurers Association of America (PCIAA) in addressing Bulletin 123 and seeking the Attorney General’s opinion.
The Insurance Institute of Indiana is a non-profit state trade association representing property/casualty, health, life and reinsurance companies doing business in Indiana.
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