Lawmakers urged to pass insurance rate bill

CARSON CITY -- Ed Rathje spent three years trying to find out why his credit history was preventing him from getting better car insurance rates, but he never got a decent answer.

State officials should step in if insurers can't give a good explanation of how they use a consumer's credit history to set rates, Rathje told Nevada lawmakers Tuesday in urging approval of Assembly Bill 404, to stop insurers from considering opening and closing of credit accounts when setting rates.

"I feel sorry for those who don't have an engineering degree and an MBA in quantitative methods, and who maybe are bashful about standing up against big insurance companies," said Rathje, who manages a Reno flight simulation school.

A consumer's credit history is one of many factors insurers consider when setting rates. AB404, sponsored by Assemblywoman Debbie Smith, D-Sparks, would ban only the consideration of the opening and closing of accounts. Insurers still could consider credit scores, unpaid debts and other factors.

"They can't tell you the rules of the game," Smith told the Senate Commerce and Labor Committee. "If they can't tell the consumer how they use that information, then how do you the consumer know how to get the best rate?"

Insurance company representatives opposed the bill, saying using such data helps insurers do a better job of predicting who is more likely to file a claim. That makes the company more competitive and can lead to lower rates, said Joe Guild, a lobbyist for State Farm Insurance.

"Credit information, which is part of an insurance score, is highly predictive of future claims filing. That's why insurance companies use it."

State Farm has invested millions of dollars on a credit-based insurance scoring system that benefits customers, Guild said. AB404 would impose "arbitrary restrictions" on using that data, making the market less competitive, he said.

But while people can monitor and correct inaccuracies in credit scores, it's much harder to understand or change insurance scores, Rathje said. "It's a black box, proprietary process. It's not credit history. It's a credit electronic Ouija board."

Despite excellent credit and 40 years of credit history, Rathje was rated poorly by insurance companies, penalized for opening accounts and other factors he said were based on improper use of statistics.