Massachusetts Realtors urge homeowner's insurance reform

The Massachusetts Association of Realtors today expressed support for legislation filed on Beacon Hill that would prohibit the use of a consumer’s numerical credit score or other credit rating systems as a determinant factor in setting rates for homeowner’s and renter’s insurance.

In testimony before the state Legislature’s Joint Committee on Insurance, MAR officials urged passage of S.B. 2093, noting that continued use of credit scores to set insurance premiums could create a new barrier to home ownership for low-income, first-time home buyers.

“Credit scores should be used to measure a borrower’s risk of defaulting on a loan, not as a means to deny a person’s eligibility to become a homeowner,” said MAR President Judy Moore, of RE/MAX Premier Properties in Lexington. “Even for those with good credit, it’s become increasingly more difficult and costly to obtain homeowner’s insurance coverage during the past couple of years. We believe additional consumer protections are necessary, and are deeply concerned that without a restriction on the use of credit scores large numbers of immigrant and first-time buyers will be unable to enjoy the privileges of home ownership because of poor or limited credit history,” she remarked.

The MAR leadership challenged the notion that credit scores are a reliable measure of an individual’s likelihood of filing an insurance claim, arguing that poor credit often results from financial hardships that occur following a divorce, job loss or medical emergency, not a predisposition to filing home repair claims or generally poor home maintenance. In addition, Realtors cited a 2002 study by the Consumer Federation of America and National Credit Reporting Association that found large discrepancies in the credit scores reported by the three major bureaus, as well as missing information in three-quarters of all consumers’ files.

“There are fundamental problems with the current practice of using credit scores to award homeowner’s insurance coverage. We’re giving insurers a license to decide who can become homeowners, and that needs to change,” Moore said.