JUNEAU (AP) -- Rural Alaskans and residents in low-income urban neighborhoods pay more for their auto and homeowners insurance.
But it's not clear whether low credit scores are the reason, concludes a recent study by the state Division of Insurance.
Sen. Kim Elton, D-Juneau, says the study bolsters his argument that credit scoring is a problem in Alaska. He's one of several lawmakers backing legislation to ban the practice.
''Secret credit scores may unfairly discriminate against some Alaskans, especially rural and older Alaskans,'' Elton said.
But Mark Niehaus, general manager for Progressive Insurance Group, calls the study flawed. Credit scoring actually improves rates for most customers, he said.
The study looked at auto and home insurance in Alaska in two time periods, 2001 and 1996-1999.
The division didn't have data matching individuals' credit scores with their insurance rates. So the study focused on categories companies assigned customers to, which help determine what rates they pay.
Preferred business customers get the best rates. Then there's standard business customers. On the bottom rung are the nonstandard customers, those considered the poorest risk. They pay the most.
A consumer can land in the nonstandard pool for a poor driving record or other reasons. But good credit is required to get in the group with the best rates, the study concluded.
In one area of Anchorage with the highest percentage of whites and the highest average income, 67 percent made it into the preferred business category in 2001. Just 3 percent were rated as nonstandard, triggering higher rates.
By contrast, in areas of the city where more than a quarter of the residents are minorities and the average income is lower, just half of the customers were in the preferred category. Ten percent were rated as high-risk.
The study found a similar trend in Fairbanks. And in several rural communities, customers were more likely to fall in the nonstandard category and less likely to be in the preferred category than city dwellers.
This was most striking in Barrow, where just 28 percent were considered preferred business customers and 24 percent were in the high-risk nonstandard category.
Firm conclusions can't be drawn from the results because researchers couldn't determine whether credit history or other factors led to higher rates, the division said.
''The limited data do suggest that unequal effects exist on consumers with varying income and ethnic characteristics,'' it said.
There's no evidence that using credit scores, a recent development, made matters worse for consumers.
For more than a decade, some insurance companies have been looking at credit histories, the reports showing bankruptcies, late payments and the like.
In credit scoring, by contrast, different elements in a person's credit history are weighed by a proprietary formula to produce a credit score.
Elton and other critics argue the secret formula can sometimes result in bizarre insurance rate decisions.
But when the division compared the 2001 results with 1996-1999, before credit scoring was used, nearly all parts of the state showed more preferred customers and fewer in the high-risk category once credit scoring became widely used.
''That, to me, says in this case credit actually helped more of those individuals qualify for the preferred market,'' said Niehaus of the insurance company.
Credit scoring may not be the reason for the improvement, though, the division said.
The list of companies wasn't the same in the two periods, and companies changed some of their rate-setting rules along the way.
Another factor also could have influenced the results, the report says. Some consumers may have been denied coverage because of their credit scores. That would have cut them out of the study, which included only policyholders.
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