While some states are cracking down on the use of credit history in insurance underwriting, one is taking a different approach.
Earlier this week, the Alaska Senate passed a bill explicitly allowing insurance carriers to use consumer credit history to determine rates for auto and homeowners. Previously, the practice was outlawed in the state and sponsors say the new legislation will bring Alaska “in line” with the rest of the country.
“This is a simple bill,” said sponsor Charlie Huggins, R-Wasilla, said. “Very simply, we become on of 50 states that allow, when you’re renewing your auto or your home insurance, credit scoring to be used. And the overwhelming majority of Alaskans will benefit.”
Some are not so sure, however. Anchorage Democrat Bill Wielechowski says he is concerned about the state’s lower-income residents, who could see their rates more than double.
“The people on the lower end of the income scale, who can least afford it, will see their rates increase under this bill,” Wielechowski told Alaska Public Media. “Insurance is not an option in this state. You can’t drive a car without it. You can’t get a mortgage without it. Our economy is sputtering. Lots of people will suffer if this bill passes.”
Wielechowski cited a Consumer Reports analysis that showed that bad credit can affect a person’s auto rates more than a history of accidents. He also shared a 2003 state report raising concerns about the effect of using credit scores on rural and older Alaskans, as well as minorities.
However, Sitka Republican Bert Stedman says the bill may actually benefit rural residents.
“I’d like to benefit from this, for a lot of my constituents – the ones that have good credit, that work hard, play, I guess, the economic game squarely,” he said. “I don’t think they should be paying for people that don’t.”
The bill will not apply to health insurance, and it does protect residents whose credit scores have been harmed by family deaths, divorces, military deployments and catastrophic events.
The House will now consider the legislation.
