To tell you the truth, I’ve never been comfortable with credit scoring as a rating factor on auto insurance. After all, can’t you be a little late with your Sears payment and still be a good driver? Were you a better driver just before you were 30 days late?

The link between credit rating and loss frequency is certainly not intuitive — in fact a dozen states currently have laws pending limiting or defining when and how and if the scores can be used.

Yet there are the actuaries with their hard cold facts irrefutably laid out showing an adverse loss trend developing as credit scores worsened. According to the Insurance Information Institute, "actuarial studies by Tillinghast, an actuarial consultant firm, have shown a 99 percent correlation between insurance scores and loss ratios — the cost of claims filed relative to the premium dollars collected.

In other words, people who have low credit scores, as a group, account for a high proportion of the dollars paid out in claims."

There is logic there, claim the insurance companies. People with poor credit handle their affairs less responsibly than those with good credit. It makes sense that they may drive less responsibly also.

Then along comes Florida Insurance Commissioner Kevin McCarty who says, "Many religious and ethnic minorities often have limited or no credit history by choice or because they are beginning to climb the economic ladder. This should bear no relationship to what they pay for insurance or to what coverage is available to them.’’

He did not mention that these groups with limited or no credit history also have identifiably higher loss ratios.

Mr. McCarty has promulgated a new rule, challenged by many industry groups, which will force companies using credit scoring to prove that credit scoring doesn’t discriminate.

This is where I get confused. If credit scoring or any other rating factor doesn’t discriminate between good and bad risks - what’s the point? Of course it discriminates!

A FLOIR memo on the rule states, "[the rule] requires insurers to demonstrate that their use of credit reports and credit scores does not unfairly discriminate against insureds because of their race, color, religion, marital status, age, gender, income, national origin, or place of residence."

This is where this little piece of social engineering gets interesting. When was the last time you had a question on an application regarding race, color, religion or national origin? If the company has no knowledge of these factors, how can it possibly "unfairly discriminate?"