[Grovenet] Answer on 42.

[allnutt]

I guess I have to say thanks to Jeff for making me think about measure 42. It prompted me to ask around and I think I found a person who actually has good information.  He has worked  on consumer advocacy issues and knows a lot about the history of this and how it came  to be an initiative.

Remember that it is already on the books that insurance companies can't raise your rates or drop your coverage base on a change in your credit report.  When that was originally going through the legislature it actually included the ban on using credit ratings as part of the initial rate setting process.  The bill had quite a bit of bipartisan support and passed one of the chambers down in Salem but got stalled in the other.  The compromise process wound up getting the bill passed by removing the part dealing with setting initial rates.
That relieves my worry that 42 was written with a Sizemore crayon.  It has had more evaluation and thought behind it than Sizemore's typical measures so it carries very little risk of those pesky unintended consequences.

And the evidence during the initial hearings for the bill had quite a bit of testimony concerning the statistics of whether poor credit is an accurate predictor of risk.  There is an element of correlation but not much support for any cause and effect.  And on top of that, other factors that also have a high correlation with credit ratings are already used in the formulas that sets initial insurance rates.  (Example; Age is also a factor in setting rates, but it correlates with credit rating too.  People's credit rating tends to get better as they get older, get jobs, get better jobs, etc.  And there are others too.)  So by using straight credit ratings to set how much you pay, the effect is to multiply the number of times it is counted.

Insurance only works when the pools are big enough to spread out real risk.  By using credit risk multiple times and straight up, it winds up being a powerful tool to be discriminatory and to cherry pick the best customers and leave the remaining worthy but poorer insurance seekers in a bind.  Since insurance is required by law, for automobile drivers at least, this gives some balance to the little guys to counter act the fact that everyone is required to buy it and helps even the playing field.

So, the bottom line for me is: Insurance companies already are using data that is correlated to credit rating to set your rates, this measure doesn't have the risks of most initiatives for poor writing, and it is essentially fair.  So thanks Jeff for bringing it up.  I was undecided before but now I support it.

Of course he explaine it much better than I did and I am trying to summarize here but if you need to know more contact me off list.

Katie