Measure 42 challenges credit checks.

Byline: Tim Christie The Register-Guard

E l e c t i o n 2 0 0 6

Oregon voters will decide next month whether to bar insurance companies from using consumers' credit scores as a factor in how much they charge for premiums.

Measure 42, the first initiative of its kind in the country, will help protect the poor and minorities from unfairly paying more for insurance because of poor credit scores, backers and consumer groups say.

Insurance companies have mounted an aggressive campaign to defeat the measure, putting up $3.5 million to date. They say a person's credit score is a valid tool to help calculate insurance risk, and that taking that tool away will cause premiums to increase for the majority of insurance customers.

Measure 42 comes before voters courtesy of anti-tax activist Bill Sizemore, who made his name in Oregon politics by writing initiatives that took on property taxes, public employees' unions and big government.

Measure 42, Sizemore said, fits right in with his previous efforts.

"It's just an attempt to help the little guy being gouged by the powers that be - in this case, the insurance industry," he said.

Insurance companies use customers' credit history as one factor in calculating an insurance score, which is used to predict how often a person is likely to file claims, and how expensive the claims will be.

"This insurance score is a measure of stability in your life," reads one background piece by the Insurance Information Institute. "There is strong statistical evidence ... that people with high insurance scores - that is, people with more stability in their lives - suffer fewer accidents."

Sizemore and consumer groups, most notably Consumers' Union, the nonprofit publisher of Consumer Reports magazine, contend that credit history is not a valid measure of someone's insurance risk.

"Poor people are being forced to pay excessive insurance rates, based on a factor that in no way is related to the risk that insurance companies incur when they issue an insurance policy," Sizemore said.

Norma Garcia, senior attorney for Consumers' Union in San Francisco, said insurers have no proof that people with low credit scores get in more accidents. What they can show is that someone with a low credit is more likely to file a claim in the event of an accident, she said.

Pat McCormick is a Portland public relations executive and the spokesman for the opposition campaign to Measure 42. He said credit history is one of many tools insurers use to make sure they're setting rates fairly and competitively.

Taking that tool away will force insurers to raise rates for most Oregon insurance customers, he said. He cites a study conducted by the Portland economic consulting firm EcoNorthwest on behalf of the opposition campaign, using information from a survey of Oregon insurers.

The survey estimates that 60 percent of personal auto policyholders and 53 percent of home insurance policyholders pay lower rates now than they would if credit scoring were not used, the report says. Consumers with good credit pay about $115 less each year for car insurance and $60 less for their homeowners insurance.

Garcia and Consumers Union question that assertion. As an example, they say that after Farmers Insurance Co. began using credit scoring to rate its policies in Ohio, the company said that 94 percent of its policyholders received a discount.

But the reality was that only 50 percent received a discount, because Farmers raised the base rate of 49 percent of its customers when it started using credit scoring, Consumers Union says. After base rates were raised, policyholders who received a 40 percent discount were still paying 20 percent more than before credit scoring was used.

Further, Garcia said, it's "absolutely absurd" to suggest that insurers won't be able to rate policies fairly if they can't use credit scoring.

"They have decades of experience rating policies without credit scoring," she said.

Sizemore, long a polarizing figure in Oregon politics, is himself something of an X factor in the campaign.

The opposition campaign has produced one TV ad that features his photograph as a narrator says Sizemore "owes millions in legal judgments for abusing Oregon's initiative process."

That's a reference to a 2002 judgment that found that Sizemore's education foundation and political action committee committed fraud and racketeering in connection with signature gathering for two anti-union measures on the 2000 ballot. Earlier this month, the state Court of Appeals upheld most of the $2.5 million judgment that Sizemore was ordered to pay to two teachers unions, but Sizemore contends he won the appeal.

And Measure 42 has created an odd political alliance: Liberal groups are supporting a Sizemore-sponsored ballot measure.

Sizemore shrugs off the strange bedfellows his measure has engendered.

"A measure says what it says and it does what it does," he said. "Who is behind it, who paid to put it on the ballot, all that is irrelevant."

MEASURE 42 Summary: Would bar insurance companies from using new customers' credit history as a basis for setting rates Financial effect: None on state or local coffers Proponents: Bill Sizemore, Consumers Union, Pacific Green Party, OSPIRG, Ecumenical Ministries of Oregon Opponents: Various insurers and business groups, including the Oregon Beer & Wine Distributors Association, the Oregon Farm Bureau, the Oregon Restaurant Association, the Oregon State Chamber of Commerce and the Oregon Timber Association Contact: The pro-campaign: voteyeson42.com. The opposition campaign, Oregonians Against Insurance Rate Increases: www.stop42.com