State Regulation

Consumer Groups to Insurance Industry: Stop Opposing Modest Pandemic Insurance Protections While You Reap Windfall Profits

Auto Insurers Want to Continue Unfair Rate Hikes Based on COVID-Impacted Credit Scores

Washington, D.C. – The Consumer Federation of America (CFA) and Center for Economic Justice (CEJ) criticized insurance companies for opposing a proposed regulation by the Nevada Division of Insurance to ban the use of credit information to increase insurance rates for the duration of the COVID-19 pandemic. This rule is modest, but it will help make insurance more affordable and ensure that consumers are not harmed by large premium increases due to declines in their credit score over the past eight months. Yet auto insurers remain steadfastly opposed to the proposal, and even tried to weaken it.

“Insurance companies have reaped massive profits due to the COVID-19 pandemic and its effects, including significantly increased unemployment, which caused a huge decline in driving, car accidents, and insurance claims. Yet they are opposed to any efforts to protect consumers from harmful credit scores resulting from the pandemic,” said Michael DeLong, CFA’s Insurance Advocate. “This proposed rule is limited, but it will protect consumers from insurance premium hikes caused by declines in their credit scores. We are encouraged that Nevada’s Division is pushing back against industry attempts to undermine this badly needed rule, and urge the Division to enact it as soon as possible.”

The proposed regulation, LCB File No. R087-20-Adverse Credit-Based Rescoring, would ban insurance companies from using changes in consumer credit scores to increase premiums if the changes happened between March 1, 2020 and two years after the ending date of Nevada’s Declaration of Emergency for the pandemic. The regulation also requires insurers that have already increased consumer premiums under these circumstances to revise those premiums and refund the amounts that consumers have already overpaid.

In a September 29th letter submitted in support of the rule, CFA wrote that “The Nevada Division of Insurance has a responsibility to ensure that insurance rates are not excessive or unfairly discriminatory. The proposed regulation is clearly in service of that obligation. It will protect safe drivers from unfair premium increases that only reflect the impact of the pandemic on their financial well-being and do not reflect changes to their risk of loss.”

“The insurance division’s rule is modest – don’t penalize consumers with higher rates because their credit reports have taken a hit from the pandemic – job loss, business closure, loss of health insurance, end of unemployment benefits and more,” said Birny Birnbaum, Director of the Center for Economic Justice. “The division’s action will help the most financially vulnerable consumers.  It’s well known that insurance credit scoring disproportionately harms communities of color and the pandemic is making that discrimination even worse. It’s outrageous that Nevada insurers are opposing this consumer protection despite having reaped billions of dollars in COVID windfall profits as auto and home insurance claims dropped like a rock.”