Measure 42: No.

Byline: The Register-Guard

Bill Sizemore has boasted that he writes his initiatives on scrap paper at the kitchen table. The anti-union and anti-tax activist's fondness for informality helps explain why Sizemore's measures tend to be poorly written and loaded with unintended consequences.

Measure 42 is no exception. If approved in the Nov. 7 election, it would prohibit insurance companies from using credit scores to calculate premiums. While the measure is presented as applying exclusively to personal lines of insurance such as automobile coverage, Sizemore's kitchen-table approach opens the possibility that the measure may also apply to commercial insurance ranging from commercial property to workers' compensation. That's an unintended consequence of the first order, one that would force well-run businesses to subsidize the insurance costs of poorly managed competitors.

Measure 42 has other potential flaws as well, and illustrates why complex, technical issues such as insurance reform should be dealt with through the traditional legislative process rather than the blunderbuss initiatives that are Sizemore's specialty.

At the urging of consumers' groups two years ago, the Oregon Legislature approved restrictions on the use of credit information by insurance companies. Among the toughest in the nation, they include a ban on insurers using credit histories to raise rates or drop existing customers. Insurers can now use credit information only when people first apply for insurance and not again, unless consumers grant permission.

In fairness, Sizemore may have actually latched on to a - it's difficult using this word in the same sentence with Sizemore's name - progressive idea that the Legislature should consider in its next session.

There is good reason, for example, to question why insurance companies should use credit data at all in setting automobile insurance premiums. Insurance companies cite studies showing that drivers with bad credit scores are a greater insurance risk, yet there is no definitive evidence actually linking credit status and accident records. What studies have found is that people with low or bad credit scores are more likely to use their policies by actually filing claims. But insurance premiums should be based on drivers' safety records, not whether they're consumers who pay their bills on time or choose to use the insurance policies that they're paying for.

Moreover, the credit reports from which consumers' scores are derived are notorious for containing inaccurate and outdated information. Millions of Americans are unfairly penalized every year for incorrect information lurking in their credit reports.

Under Oregon law, credit-based scoring models must rely solely on credit history and cannot legally include factors such as race, nationality or income. Yet there's a very real risk that credit scores can serve as proxies for those same factors and have a disproportionately negative impact on minority and low-income families.

The Oregon Legislature should consider following California's lead by barring insurance companies from using credit scoring and requiring that rates be based primarily on relevant factors such as safety records, driving experience and number of miles driven. (California insurers can use credit scores if they can prove they're not discriminatory, but none has so far attempted to do so.)

The insurance industry, which so far has spent $3.5 million campaigning against Measure 42, warns that it would cause auto insurance rates to rise for the majority of Oregon consumers with good credit scores. Yet California's ban has not caused auto-insurance premiums to increase. In fact, state insurance officials say rates have actually declined as a result of increased competition for market share that resulted from the state's new rules.

An alternative reform option would be for the Oregon Legislature to require that insurance companies make public the scoring formulas that they used to set premiums and that they are now allowed to keep secret. Those formulas could also be made subject to regular review by state regulators.

But those are all issues that should be considered and fully debated by state lawmakers. For now, voters should reject Bill Sizemore's kitchen-table solution by voting no on Measure 42.