Senate Bill 1435: Impact of Credit Information on Insurance Rates

A Senate committee recently advanced a significant proposal aimed at reshaping insurance rate setting by preventing insurers from considering credit information. This initiative, encapsulated in Senate Bill 1435, was introduced by Senate Minority Leader Julia Kirt and successfully progressed past the Business and Insurance Committee with a 5-3 vote.

Impact on Insurance Premiums

Senator Kirt expressed concerns that current practices, where individuals with excellent driving histories might face elevated car insurance costs due to suboptimal credit scores, are problematic. This disparity can lead to varying insurance premiums for homeowners with similar properties, all based solely on credit evaluations.

Credit scores, often used to determine interest rates for financial products like loans and credit cards, came under scrutiny during the committee discussion. Senator Brian Guthrie raised questions about existing state policies prohibiting credit score usage and the potential effect of such bans on insurance rates. Kirt noted that while some states have enacted these bans, isolating the impact on rates solely from credit policies remains challenging due to wider reforms.

Controversy and Industry Opposition

Kirt argues that "Oklahomans are paying significantly more for home insurance if their credit score is even mildly below average," asserting this practice unfairly burdens individuals with limited incomes who do not pose greater insurance risks. She criticized the merger of credit risk with insurance risk, highlighting a lack of supporting data for such practices.

Contrarily, the American Property Casualty Insurance Association (APCIA) opposes this legislative proposal. Walter R. Gonzales, a key figure in APCIA's state government relations, argued that removing credit score considerations would force low-risk policyholders to subsidize those at higher risk. He emphasized that "Data shows that credit-based insurance scores save consumers 30% to 59% on average," and most policyholders either benefit or remain unaffected by their use.

Legislative Road Ahead

The committee advanced the bill with its title removed, postponing further legislative action as a procedural strategy. Additionally, the committee deferred decisions on two more insurance-related bills introduced by Kirt, Senate Bill 1438 and Senate Bill 1444, due to the absence of a committee member with insurance expertise.

The APCIA has also expressed opposition to these further legislative efforts, illustrating a continuing debate within the industry over regulatory compliance requirements and risk management strategies linked to AI-driven prior authorization delays.