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Credit-based policy rates face scrutiny
By ASSOCIATED PRESS
Published January 17, 2007
Several Supreme Court justices seemed taken aback Tuesday at the idea that insurance companies might be required to notify tens of millions of customers they aren't getting the best rates because of their credit reports. In making the argument for notification, lawyers for consumers said two insurance companies - GEICO and Safeco - violated the Fair Credit Reporting Act by failing to send customers notices of adverse decisions made because of their credit reports. One consumer represented in the case, Ajene Edo of Portland, Ore., applied for auto insurance. GEICO concluded that Edo didn't qualify for its coverage for low-risk customers. Instead, it offered to insure him, but as a moderate-risk customer. Edo's lawyers and the 9th U.S. Circuit Court of Appeals say the company used the wrong comparison. The court said that rather than using the average credit score, the company should use the top potential score. Under that formulation, customers should be notified whenever a consumer pays a higher rate because his credit rating is less than the top potential score.
[Last modified January 17, 2007, 00:16:47]
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