Measure 42What is it?

The measure would ban insurance companies from factoring in people’s credit scores or history in determining rates and premiums. It applies to medical, health, accident, automobile, fire and liability insurance.

Where did it come from?

Longtime Oregon anti-tax campaigner Bill Sizemore wrote it. The Consumers Union, the nation’s largest consumer-protection advocacy group, has taken it up as a cause, perhaps even considering Oregon as a test case for the rest of the nation.

What would it do?

Insurance companies would not be allowed to use a person’s credit history to determine how much they would pay for an insurance policy. For example with automobile insurance, a company may consider credit scores in addition to driving history, years of driving experience, number of miles driven each year and claims history as factors in determining rates. Right now, Oregon’s four largest insurers, State Farm, Farmers, Safeco and Allstate all check credit scores.

This ban would only apply to new policies and would not affect people who already have insurance.

Some organizations opposing the measure also believe it would have a devastating effect on commercial insurance, which would mean well-run companies would, in effect, ultimately subsidize companies that cut corners.

Reality check:

Bill Sizemore wrote this. The money to run most of the campaign in favor of the measure came from millionaire Loren E. Parks of Henderson, Nev., who has had a finger (and many a dollar) in Oregon ballot initiatives over the years. Both say they usually prefer not to impose more government regulations on businesses, but feel in this case they are “supporting the little guy.”

Insurance industry advocates and opponents of this measure say if passed, the measure would effectively increase insurance rates for two-thirds of Oregon motorists and others who would otherwise enjoy lower premiums when they sign up for new insurance policies because they have good credit scores.

Research has shown a clear correlation between poor credit histories and the increased likelihood of filing a claim, the insurance companies say. Opponents dispute this, and say using credit scores unfairly discriminates against low-income people and minorities, especially blacks and Hispanics.

The Consumers Union’s magazine, Consumer Reports, has saved millions of Americans beaucoup dollars on large purchases by publishing its comparison shopping tables. Its lawyers say there are so many errors in credit reports – on which scores are determined – that consumers are penalized when they are used for any purpose.

Check the fine print:

Bill Sizemore wrote this. ‘Nuf said?

Also, although the system isn’t perfect, the rules now make it much easier for Americans to obtain their credit reports and correct errors.

Recommendation: No.

After a series of complaints, the Oregon Legislature spent hours drafting rules back in 2003 to cover related issues and came up with a ban on using credit scores to set premiums or cancel policies for existing consumers.

Like other Sizemore-authored measures, the exact wording of this initiative is so loose that if enacted eventually it will be the subject of a court ruling. It does not spell out how it would or could affect commercial insurance, for example.

This is the classic case of an initiative that sounds worth a look at first glance, but would cause disruption, uncertainty and ultimately higher rates for everyone.