Dan Kummer of the National Association of Independent Insurers, attributes fears of discrimination to the growing pains of the system.

As an example, Kummer points to previous credit-scoring systems that gave consumers lower scores based on the number of inquiries into their credit status. That meant that a person shopping around for the best deal on insurance could get the same black mark on their record as a person applying for lots of credit cards. This practice led to an outcry from consumers, and insurers are responding, says Kummer.

"A lot of companies have started changing their algorithms so the number of inquiries is no longer a factor," says Kummer. "An algorithm is not something that's locked in stone."

But those assurances aren't enough for Maryland Insurance Commissioner Stephen Larsen. Maryland has taken the lead in investigating the inner workings of insurance-scoring models, but currently allows insurers to use insurance scores to help set premium rates.

"Whenever insurance rates are based on what to the public is a black box, it raises legitimate concerns," says Larsen. "But I don't have the authority to bar insurers from using a tool if they can show a correlation and that it is reasonable to use that technique."

So the Maryland Insurance Administration adopted a regulation that requires insurers to provide their insurance-scoring model for review.

"It seems intuitive that someone with a low income would have a hard time getting a high credit[-based] score," says Larsen. "So we're trying to gather data to better illuminate the impact of credit[-based] scoring."

Gathering that data has not been an easy task. Even beyond the difficulties he is having in persuading Fair, Isaac and Co. to allow outside experts to review their proprietary insurance-scoring model, the fact that insurers use the same model in several ways has thinly stretched Larsen's resources.

"Insurers using models in different ways does create manpower issues," says Larsen. "It's hard to get a handle on what the industry is doing."

Larsen hopes to get a better idea of what goes into insurance scores, and to make sure that the poor and minorities are not being "double charged" as a result of insurance scores.

"Auto insurance rates are highest in the cities where there is also the highest concentration of poor and minorities," says Larsen. "So unfortunately there is already an adverse impact, but is [insurance] scoring exacerbating the problem?" He also hopes to persuade insurers to be more forthcoming on why they take any "adverse action" — meaning rejecting applications or charging higher rates — when they use credit-based insurance scoring.

Watts says that Fair, Isaac and Co.'s silence on the details of a person's insurance score isn't sinister at all — they simply want to make sure that consumers will be able to understand what they are given.

"As lenders came to rely more heavily on credit scores, we helped lead the charge to open the box," says Watts. "Now we're in the process of figuring out the best way to disclose insurance scores to consumers, without harming the process."

You can currently buy a package including your credit score, a copy of your credit report, and an explanation of the score from Fair, Isaac and Co., and the company hopes that it will soon be able to provide a similar service for insurance scores.

Advocates for consumer rights like Hunter of the CFA remain skeptical. The fact that no one can definitively show how having bad credit makes someone a worse driver or homeowner proves that credit-based insurance scoring a bad tool, he says.

"One of the ideas of classifying people into groups is to identify risk," says Hunter. "This is not a risk-identifying tool, this is a marketing tool so that the insurance companies can sell policies to the rich."
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