OKPOLICY.ORG
Senate Minority Leader Julia Kirt, D-Oklahoma City, has introduced three consumer-focused insurance reform bills aimed at responding to the recent significant increases in property insurance rates across Oklahoma. The first is Senate Bill 1435, which was passed out of the Senate Business and Insurance Committee last Thursday. The committee is chaired by Sen. Bill Coleman, R-Ponca City.
SB 1435, the least complicated of the three measures, prohibits insurance companies from using credit scores to set insurance rates for property owners. According to Kirt, homeowners of property with equal value are often charged wildly different rates for their insurance based on their credit scores.
Kirt told the committee that someone with a credit score in the 600s is paying 104 percent more for their home insurance than a homeowner with similar risk patterns but a higher credit score. Under current law, insurers are prohibited from using credit scores as the sole basis for rates — but with more than a 100 percent difference, that restriction seems to have been ineffective.
Insurance companies are apparently arguing that if they are not allowed to charge more to people with lower credit scores, the premium income will have to be made up by those with higher credit scores. There may or may not be some correlation between credit scores and loss claims, but it’s hard to imagine it would justify such a huge difference in rates.
SB 1435 appears to raise an equity issue more than anything. It’s another example of how our laws and policies, intentionally or not, often work in favor of the well-off to the detriment of the less well-off. Rarely do we err on the side of the less well-off.
SB 1435 made it past its first hurdle, passage out of committee. But even after the title was stricken, and Committee Chair Coleman requested the committee to pass the bill, it only passed on a 5-3 vote. One switched vote and the bill would have been dead.
The other two reform measures introduced by Sen. Kirt are SB 1438 and SB 1444, which are also assigned to the Business and Insurance Committee. SB 1438 would provide a formula for property insurers to calculate an “anticipated underwriting profit” over a three-year period and, if the profits exceed the anticipated profit, the company would be deemed to have excessive profit and would be required to return part of the premium either in cash or credit for future insurance.
SB 1444 requires rate information to be submitted to the Insurance Commissioner 60 days before the rate goes into effect rather than 30 days after as provided in current law. Incredibly, under current law, in competitive markets — which is how most insurance is sold — insurance rates may only be disapproved by the Insurance Commissioner if they are inadequate or unfairly discriminatory. SB 1444 authorizes the commissioner to disapprove rates determined to be excessive.
SB 1438 and SB 1444 are intended to address the causes of high property insurance rates, while SB 1435 focuses on the fairness of rate distribution. Sen. Kirt has accurately pinpointed a major “affordability” issue that has many people struggling. No doubt, the insurance industry has noticed these bills. It will be interesting to watch their progress — or lack thereof.
