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Legislation would influence rate-setting

Associated Press

ST. PAUL -- The insurance industry's practice of using consumer credit information when setting prices would be outlawed under a legislative proposal put forward Thursday by Attorney General Mike Hatch.

Hatch and two DFL legislators from Minneapolis -- Sen. Larry Pogemiller and Rep. Joe Mullery -- said they'll push to prohibit insurance companies from consulting credit scores when determining how much to charge someone for auto or home coverage.

They argue it's unfair to charge people with lower credit scores more for insurance.

"Logically, there should not be a higher risk of having, for example, a car accident because you have a poor credit history," Pogemiller said. "Senior citizens, low income people, students and others can be fine drivers and yet for a variety of reasons receive poor credit scores."

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Mark Kulda, a spokesman for the Insurance Federation of Minnesota, said the industry will oppose the bill. He said studies have shown a proven link between a person's credit history and their risk of filing an insurance claim.

He said driving records are no longer a reliable method for determining risk because traffic courts have made it easier for drivers to clear their record.

If insurers were barred from using credit scores, Kulda said consumers who have received price breaks for having good credit scores would pay more.

"The risky driver would get away with subsidized insurance," he said.

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