- The Washington Times - Friday, June 13, 2003

Marylanders who earned discounted homeowner’s insurance rates due to their good credit histories now face double-digit rate increases, thanks to a law passed last year by the General Assembly. The Washington Times reported yesterday that the legislation, which took effect in October, has caused insurers such as Travelers’ Property Casualty Corp. to end the practice of using someone’s credit rating as a factor in determining his or her homeowners’ insurance rate. Many insurance companies use credit histories as a factor in determining premiums, because individuals with poor credit histories are more likely to file claims.

As policy-holders’ insurance comes up for renewal, they are receiving letters that inform them that their premiums will change because of the ban. “As a valued Travelers customer, we wanted you to know that the new law has a direct impact on your renewal premium increase,” read a typical letter to a Travelers policy-holder. The company has received more than two dozen phone calls from customers angry about the rate increases. Most of those have come from “super-preferred” customers, who will lose a 20 percent discount because insurers can no longer use factors such as credit history, debt amount and the amount of new credit a policy-holder is taking on in determining rates.

Delegates Carolyn Krysiak, Hattie Harrison, Ruth Kirk and Tony Fulton of Baltimore, current House Majority Leader Kumar Barve of Montgomery County and John Donoghue of Washington County cosponsored the bill, which passed the House by a 125-6 margin and the Senate 42-1. Consumer advocacy groups claim that good credit discounts constitute discrimination against low-income workers. We disagree. There are many low-income, working-class folks who struggle and sacrifice to pay their bills on time. While some credit problems, to be sure, result from simple bad luck, a great many come from poor financial planning and just plain irresponsibility. And, who among us doesn’t know middle-class people who run up tens of thousands of dollars worth of credit-card debt, and try to sneak by making only the minimum payments? Why should they benefit from a state law ordering insurers to disregard evidence that someone poses a higher credit risk?

The reality is that credit history can be an important indicator for an insurance underwriter looking to consider who to insure. We urge Gov. Robert Ehrlich, who has yet to take a public position on the matter, to bring reform legislation before the General Assembly next year.

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