Alabama Questionaire - Use of Credit Information in Rating

DATE: January 10, 2002 RE: Alabama Questionaire - Use of Credit Information in Rating TO: All Property & Casualty Insurers Licensed in the State of Alabama All Property and Casualty Insurers licensed in the state of Alabama are required to complete the following questionnaire regarding their filed and approved rates in effect as of February 14, 2002 for private passenger automobile and personal residential (homeowners and dwelling fire & allied lines) insurance. This questionnaire is due at the Department of Insurance no later than February 14, 2002 and should be submitted to the address below: Alabama Department of Insurance Attention: Johnny Johnson 201 Monroe Street, Suite 1820 Post Office Box 303351 Montgomery, Alabama 36130-3351 All private passenger automobile and personal residential (homeowners and dwelling fire & allied lines) insurance rate filings with effective dates of February 15, 2002 or later must also include a completed questionnaire submitted along with the filing. Failure to provide complete responses with the initial filing will result in delays in the filing review process. Pursuant to Alabama Insurance Code §§27-13-28 and 27-13-66, Code of Alabama (1975), all information submitted in response to this bulletin in conjunction with a rate or rule filing will be classified as confidential and shall be kept under lock and key. Provide your responses on a separate document, repeating each question with the corresponding response included below the question. The responses below relate to (check one): _____ The Company’s currently approved and effective rates Filing Effective Date:____________________ _____ The Company’s proposed rates Proposed Effective Date:____________________ Do you use information from consumer credit reports, including credit-scoring or insurance scoring models that use information from consumer credit reports, to underwrite, rate, assign a risk to tier or company within group? If yes, answer questions 2-12 below. Explain how you use information from credit reports, including credit scoring or insurance scoring models, in your underwriting and/or rating of personal lines insurance for the product in this filing. This explanation should include: What specific information is used from the credit report, What effect, if any, does a lack of credit history have on underwriting, acceptance or rates, The name of the credit reporting agencies used to acquire the information, When the information is used (initial underwriting, renewals etc.), On whom the information is collected (all policyholders, selected sub-groupings of policyholders, etc.), How the information is used (e.g. accept or decline risks, assign to company or tier, apply a specific rating factor, determine eligibility for payment plans). If you use a credit scoring or insurance - scoring model to either underwrite or rate risks, please answer the following: Identify whether the model is developed by your company or is provided by an outsider vendor. Explain when you began using the credit scoring model and the date of the last change in the model. If the model was changed within the past year explain the change. Provide the specific factors included in the model and the associated weights assigned to each factor and how the weights were determined that are used in the scoring model to develop a score. Explain whether the score cutoffs or ranges used to underwrite or rate policies have changed over the past year. If they have changed, explain the change. For example, if the credit score cutoff for the best rate has changed from 700 to 710, give the date of the change and explain how the score cutoffs were changed. What information do you disclose to your agents, to your applicants, and to your policyholders regarding the use of any credit-scoring or insurance-scoring model to either underwrite or rate risks?