Assembly Concurrent Resolution No. 27–Assemblymen Ohrenschall, Giunchigliani, Parks, Anderson, Atkinson, Buckley, Carpenter, Chowning, Claborn, Collins, Conklin, Geddes, Gibbons, Goicoechea, Goldwater, Grady, Griffin, Hardy, Horne, Knecht, Koivisto, Leslie, Mabey, Manendo, McClain, McCleary, Pierce, Sherer and Williams

 

May 19, 2003

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Referred to Committee on Elections, Procedures, and Ethics

 

SUMMARY—Directs Legislative Commission to appoint interim committee to study business practices of automobile insurance industry. (BDR R‑387)

 

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

Assembly Concurrent RESOLUTION—Directing the Legislative Commission to appoint an interim committee to conduct a study of business practices of the automobile insurance industry.

 

1-1  Whereas, Insurance is an essential economic tool for the

1-2  protection of the assets of the residents and property owners of

1-3  Nevada; and

1-4  Whereas, In most cases, automobile insurance is the only

1-5  method available to Nevadans to satisfy the statutory requirement to

1-6  provide proof of financial responsibility as a condition of vehicle

1-7  registration; and

1-8  Whereas, The insurance industry uses various methods to

1-9  underwrite or rate an applicant for insurance risk; and

1-10      Whereas, It is manifestly unfair to base auto insurance rates on

1-11  a person’s income, age, gender, address, postal “zip” code, ethnic

1-12  group, religion, marital status or nationality; and

1-13      Whereas, This practice of “scoring” a potential customer is not

1-14  prohibited in this state, despite the fact that the model act developed

1-15  by the National Conference of Insurance Legislators prohibits an

1-16  insurer from credit “scoring”; and

2-1  Whereas, Over 90 percent of the automobile insurance carriers

2-2  who offer coverage in Nevada consider consumer credit reports

2-3  when determining insurance premiums and charge a higher

2-4  insurance premium for automobile insurance coverage for those

2-5  drivers having an unfavorable credit history or no credit history; and

2-6  Whereas, Some insurance companies have started using

2-7  insurance credit scores as the basis for nonrenewal of the coverage,

2-8  regardless of whether a claim has ever been filed or premiums have

2-9  been paid on time; and

2-10      Whereas, A related practice referred to as “geographic

2-11  redlining” is a rating method that has been shown to result in the

2-12  fact that the poorest customers are systematically denied coverage

2-13  by lower-cost standard insurers and forced to purchase much higher-

2-14  cost policies from nonstandard insurers or the residual market; and

2-15      Whereas, The public policy of the State of Nevada may dictate

2-16  that limitations need to be placed on the use of certain rating

2-17  practices, such as prohibiting the use of insurance credit scoring as

2-18  the sole factor for rating risk or prohibiting the use of geographic

2-19  redlining or the use of a credit history that is in a legitimate dispute;

2-20  now, therefore, be it

2-21      Resolved by the Assembly of the State of Nevada, the

2-22  Senate Concurring, That the Legislative Commission is hereby

2-23  directed to appoint an interim committee to conduct a study

2-24  concerning the business practices of the automobile insurance

2-25  industry in Nevada; and be it further

2-26      Resolved, That the interim study committee must be composed

2-27  of six members selected as follows:

2-28      1.  Three members from the Assembly, at least two of whom

2-29  served on the Assembly Committee on Commerce and Labor during

2-30  the 72nd Session of the Legislature; and

2-31      2.  Three members from the Senate, at least two of whom

2-32  served on the Senate Committee on Commerce and Labor during the

2-33  72nd Session of the Legislature; and be it further

2-34      Resolved, That the interim study must include, without

2-35  limitation, consideration of the following issues regarding practices

2-36  of the automobile insurance industry:

2-37      1.  Whether the use of insurance credit scoring for rating

2-38  purposes results in discrimination against persons in a protected

2-39  class, such as classification by age, gender or national origin;

2-40      2.  The types of consumers, based on demographic factors, who

2-41  benefit from or are harmed by geographic redlining or the use of

2-42  credit history in automobile insurance rating and underwriting;

2-43      3.  The extent to which the use of credit history affects rates

2-44  charged to the consumer;

3-1  4.  Whether the use of insurance credit scoring for rating

3-2  purposes produces disparate effects that unjustly harm people of

3-3  color or people with low incomes; and

3-4  5.  Additional issues that may be identified by the interim study

3-5  committee during the course of its review; and be it further

3-6  Resolved, That the interim study committee shall consult with

3-7  and take testimony from independent economists and impartial

3-8  experts, as well as professionals in the automobile insurance

3-9  industry and consumers in the insurance market; and be it further

3-10      Resolved, That the Division of Insurance of the Department of

3-11  Business and Industry shall provide such advice, information and

3-12  assistance to the interim study committee as may be requested by

3-13  the committee to carry out the provisions of this act; and be it

3-14  further

3-15      Resolved, That any recommended legislation proposed by

3-16  the interim study committee must be approved by a majority of the

3-17  members of the Senate and a majority of the members of the

3-18  Assembly appointed to the committee; and be it further

3-19      Resolved, That the Legislative Commission shall submit a

3-20  report of the results of the study and any recommendations for

3-21  legislation to the 73rd Session of the Nevada Legislature; and be it

3-22  further

3-23      Resolved, That the Chief Clerk of the Assembly prepare and

3-24  transmit a copy of this resolution to the Commissioner of Insurance.

 

3-25  H