Mills calls on Feds to support terrorism insurance.

New York State Insurance Department Superintendent Howard Mills has called for continued Federal support for the Terrorism Risk Insurance Act.

In a keynote address to the insurance industry forum, Credit and Community, sponsored by Neighborhood Housing Services of New York City and State Farm Insurance, Mills focused on the need for a continued Federal role in supporting the availability and affordability of terrorism insurance, something on the minds of many New Yorkers just four years after the attacks on the World Trade Center.

He called for Congress to reauthorize guarantees scheduled to sunset at the end of this year with the expiration of 2002's Terrorism Risk Insurance Act (TRIA), saying that the guarantees protected insurers in the event of "an attack on a shopping mall in Utah."

Even though it is not generally considered a high-threat target, Mills said, such an attack would send a devastating message to the nation that no community is safe. But without the 'federal backstop' of terrorism re-insurance, Mills said, insurers would not be able to offer affordable products to insure such areas. Withdrawal of the federal backstop for property/casualty insurers, Mills warned, would cause a huge change in behavior because insurance for many industries would no longer be affordable.

If that were to happen, Mills said, terrorists would achieve their main objective of destabilizing American society.

The forum brought together industry leaders, community advocates, and academics in an examination of credit scoring practices by insurers. Participants at the Manhattan seminar agreed that credit scoring is a valuable tool, and that resistance coming from consumers is primarily due to a lack of understanding of how it works.

"Credit quality is not static. Customers have the ability to change their profile and change their behavior--and we show them how to do it," said Sarah S. Gerecke, a panelist and the Executive Director of Neighborhood Housing Services (NHS), New York City's leading affordable housing non-profit. She explained how NHS, which provides education to prospective home buyers, helps consumers correct mistakes and raise their credit scores.

Credit scoring by insurers is similar to, but not the same as, credit scoring used by consumer credit agencies, as insurers place different weights on different factors than do credit agencies.

T. J. Derella, President and CEO of the Kingstar Company and past president of the Professional Insurance Agents of America, said that while credit scoring is used by most insurers, the names they use for different categories of risk need to be standardized. "You have scoring systems which run from A to Z," he said, "where Z is the highest." He called for the industry to use rating categories which are more transparent to the consumer.

Dr. Marcellus Andrews, an economist with the Insurance Information Institute, told the audience of industry executives that credit scores are not discriminatory. He said that low credit scores for Americans of color tend to reflect their lower economic status in society, and added that critics of credit scoring are making a mistake by "shooting the messenger".

He also said that a comprehensive study done at the University of Texas showed that people with lower credit scores tended to be greater risks for insurers than people with higher scores, reporting larger losses to insurers.

Also speaking at the seminar, which was held at the U.S. Trust Company on 47th Street in Manhattan, were Matt Hodson, Vice President of Agency for State Farm, who hosted the forum, Jeanne Salvatore, Senior Vice President of Communications of the Insurance Information Institute, who moderated the forum, Kristina Baldwin, Regional Manager and Counsel for the Property Casualty Insurers Association of America, Joseph DeMauro, Deputy Superintendent of the NYS Insurance Department, Kevin Beumel, Product Research Manager for TransUnion, and Todd Pittman, Director of the national NeighborWorks[R] Insurance Alliance.