Measure 42

Argument in Favor

Insurance Agents Support Ban on Credit Scoring

How bad is insurance credit scoring? The practice is so indefensible that even the agents representing the insurance industry support banning the use of credit scoring.

Following are some of the national agent associations supporting Measure 42's ban on credit scoring:

National Association of State Farm Agents
United Farmers Agents Association
National Association of Professional Allstate Agents, Inc.

These agents represent some of the largest insurance companies in the world.

In their letters opposing the use of credit scoring, insurance agent associations made it clear that negative credit scores often stay with people long after they have revitalized their credit, artificially increasing their insurance costs. Often people with excellent credit do not qualify for preferred insurance rates, for such reasons as having "too many credit cards", even though the client carries low balances on their accounts and have never been late.

How does having what an insurance company considers too many credit cards make you a greater insurance risk? The notion is so absurd that most companies keep their credit scoring models secret, calling them "trade secrets".

Agent associations also comment that credit scoring discriminates against minorities and lower income groups, who typically have lower than average credit scores, often through no fault of their own. Credit scoring allows companies to "redline" entire neighborhoods and ethnic groups, a reprehensibly discriminatory practice that would be illegal if companies did it openly.

Who suffers most from credit scoring? Widows, single moms, women who just went through a divorce, college students, people who pay cash or don't use much credit, and young couple seeking a low mortgage rate, and unavoidably have their credit checked too many times.

Finally, credit scoring is totally unnecessary. Insurance companies easily could return to the historical methods of determining rates, such as using driving records and other factors truly related to risk.

Please vote "Yes" on Measure 42 to abolish unfair insurance credit scoring.

(This information furnished by Bill Sizemore.)

Argument in Favor

Dear Oregon Voters:

Let me say right up front: I'm not poor. I don't have a low credit score. I have nothing to gain by supporting this measure, yet I donated most of the money to help place it on the ballot. Here's why:

I enjoy supporting measures that help the little guy. I helped fund a measure to put violent criminals in jail and make the streets safer for everyone else. I got tired of watching overly lenient judges give light sentences to repeat offenders, who would go right back out and rape, molest, assault, or even murder again. Crime rates dropped significantly as a result of that measure.

I have donated money for measures to lower taxes for everyday working people. I think families are better off when they get to keep more of the money they earn and take care of themselves. When people are self-sufficient and get less help from government, it helps restore their dignity as human beings.

Measure 42 is a measure that helps people who are generally less capable of defending themselves than most. Insurance companies have found it easier to charge higher rates for people with bad credit scores than to base rates on realistic factors such as driving records, number of wrecks, frequency of claims, etc. That's wrong.

It makes no sense to claim that people are more likely to get in an accident because they have bad credit. I think most people know that instinctively. Insurance companies do it because it is easier. All they care about is maximizing premiums. They don't care where the money actually comes from or whether their rating system is fair or logical.

I'm not against the insurance industry. However, when they lobbied for laws requiring that everyone buy their product, they assumed the responsibility to charge fairly. I sponsored Measure 42, because it makes them do that.

Please vote for this important measure.

Loren Parks

(This information furnished by Loren E. Parks.)

Argument in Favor

Credit Scoring Is Anti-Free Market

My name is Bill Sizemore, and I wrote Measure 42. I am a normally a "free market" kind of guy. I do not believe in regulating business unnecessarily, because competition and free market principles tend to eliminate injustices and overpricing over time.

However, a hand full of very large companies have started a trend in the insurance industry that is anti-competition and anti free market. I will use this space to explain to my fellow free market conservatives why credit scoring is truly anti-competition.

First of all, when government requires that we buy a product, as is the case with insurance, it is no longer a free market product or voluntary transaction. When people are forced to buy a product or service, the market is automatically tilted in favor of the seller and reasonable controls must be installed to insure that consumers are not gouged.

Also, credit scoring discourages price comparisons and shopping for lower rates. Under current law, insurance companies cannot use credit scoring to raise the rates of current customers for their existing policies. However, if a customer adds a new policy or switches companies, credit scoring can be used to impose higher rates. The result of this practice is to build a moat around the companies and keep existing customers from shopping for lower rates. This is clearly anti-competition.

Shopping for lower rates is the best way to insure competition, but credit scoring punishes customers for shopping around or switching companies.

If credit scoring was banned, as Measure 42 would do, not one insurance company would go out of business. The industry would simply be forced to use honest, meaningful grounds for establishing premiums, such as driving records and loss histories.

Insurance companies should be required to base rates on actions or events that genuinely are related to the risk the companies assume when insuring a customer. Credit scoring is simply not such a factor.

(This information furnished by Bill Sizemore.)

Argument in Favor

Insurance Company Claims about Credit Scores are Bogus

Insurance companies routinely charge customers higher insurance rates based on their personal credit scores. This widespread practice unfairly disadvantages the poor and minorities and is not based on sound actuarial principles.

Insurance companies claim there is a correlation between credit scores and frequency of claims, but the truth is: More than 90 percent of people with low credit scores have perfectly normal claim frequencies.

Credit scoring does not just affect poor people. Even people with great credit scores sometimes pay higher insurance rates, because they have "too many credit cards", even though they have never been late and carry low balances.

Lots of good, responsible people temporarily have bad credit due to no fault of their own. Common sense tells us that this does not make them a greater risk to an insurance company. Good people lose their job after being with a company for decades, as with the dot.com collapse. Medical emergencies wipe out a family's personal finances. A divorce suddenly leaves a single mom with kids to take care of and her credit score takes a hit.

How does any of this mean these folks are more likely to have an auto accident? It doesn't. Insurance companies that use credit scores are gouging poor people, plain and simple.

Many agents have contacted me and told me that they would gladly speak out about the injustice of credit scoring, but can't because they believe they would be fired, if they did.

Finally, credit scoring allows a person with a higher credit score and an "at fault" accident to pay a lower premium than a person with a lower credit score and a perfect driving record. This is an obvious absurdity.

Please vote Yes on Measure 42.

(This information furnished by Bill Sizemore.)

Argument in Favor

Your Credit Score is Not Your Insurance Credit Score

Pretty much everyone knows they have a credit score. What most folks don't know is that the insurance industry uses credit scoring in a way that is all smoke and mirrors.

Here's how it works: Insurance companies pick and choose from a developed list of approximately 120 different criteria from which they shape into their own unique "credit scoring model". A company's unique credit scoring model is considered a trade secret. Companies are not required to disclose to the public how they score people. If you doubt my word, call the state insurance commissioner and ask to see a company's secret scoring model, which is required to be on file with the commission. Be advised, don't hold your breath.

What all this means to you is that you have no way of discovering why you don't qualify for a company's preferred rates, because those rates are based on the company's "secret" scoring model. Because each company creates its own model, your insurance credit score may be lower with one company than another, but you'll never know why.

What's really going on here? You see, it's illegal under federal law for insurance companies to "redline" or discriminate against people by charging higher rates based on factors such as race or ethnicity. Redlining neighborhoods is also illegal.

Credit scoring is a way for insurance companies to redline and get away with it. Because a company's scoring model is unique and secret, no one knows for sure why they are scored the way they are. All they know is that they have good credit, good driving habits, and no tickets or drunk driving violations, but still don't qualify for preferred rates. Meanwhile the rich guy down the road, who totaled his Mercedes last year, pays lower premiums. How is this right?

Until insurance companies fully disclose their scoring models, this unfair, discriminatory practice should be banned. Plain and simple.

(This information furnished by Bill Sizemore.)



Elections Division, Oregon Secretary of State • 136 State Capitol • Salem, OR 97310-0722