Hartford To Refund 1,400 Delawareans

Approximately $135,000 

Company’s Error In Use Of Credit Scoring, Pursued By Commissioner Denn and Delaware Customer, Leads To Refunds

Dover – In July, James Fry of Dagsboro e-mailed Insurance Commissioner Matt Denn about an increase in his homeowner insurance premium that he knew couldn’t be right, in spite of the company’s insistence that it was.

On Monday, Commissioner Denn said that Mr. Fry’s alertness and an investigation by the Insurance Commissioner’s Office have resulted in an admission by The Hartford insurance company that it owes about 1,400 Delawareans a total of $135,000.

The refunds are the result of Hartford’s use of credit scores to set insurance rates. Many policyholders with no balances on their credit cards or loans, like Mr. Fry, were put in a higher risk category than they should have been. While the company said almost 3,400 Delaware policyholders with no credit card or loan balances had the potential to be affected by the error, refunds are only due to 1,400 because the correction of the error did not actually result in a different insurance rate for the other 2,000.

“I commend Jim Fry for bringing this situation to my attention and am pleased that our action will result in corrected scores for 3,400 Delawareans and refunds for 1,400 Delawareans,” Commissioner Denn said. “Sometimes persistence pays off when what you are being told doesn’t seem to make sense.”

The refunds – which will come in the form of credits for affected current policy holders and checks mailed to any affected former policyholders – should average $96 for the 1,400 Delawareans. According to Hartford, the company has 27,000 policies in Delaware.

In July, Mr. Fry asked for an explanation of a proposed annual increase in his homeowner premium from $642 to $868. He was told $43 of the $226 was the result of greater coverage under his policy, but the rest was due to being placed in a higher-priced “rating tier” based on his credit score. He contacted Commissioner Denn directly by email, whose office was given the same reasoning.

“I knew I could not afford a 35 percent increase in my insurance. I also knew that nothing had happened with my credit to result in such an increase because, in fact, I don’t have any credit card balances or loans at all,” Mr. Fry said.

Following multiple contacts with Hartford and the issuance of a subpoena by Commissioner Denn for the specific reason behind Mr. Fry being placed in a higher-priced tier, the company disclosed that it had not correctly used its own credit scoring model for Mr. Fry. While negative credit factors were used to place policyholders in higher-risk categories, the positive credit factor of not having any credit card or loan balance was not used to lower the rating level. The company determined it had made the same error with many other policyholders as well.

Mr. Fry, for his part, has now received a credit of $180 on his homeowner insurance policy.

Commissioner Denn used Monday’s announcement as an opportunity to continue his call for a ban on the use of credit scores in setting insurance rates.

“This incident makes clear one of the criticisms I have consistently made about credit scoring: that it is fraught with opportunities for error. Credit scoring in the insurance field is both unfair and unnecessary, and I once again ask the General Assembly to pass Senate Bill 2, which would prohibit its use in auto and homeowners insurance,” Commissioner Denn said. “I encourage all Delawareans to contact their elected representatives to encourage them to vote in favor of banning the use of credit scores in setting insurance rates.”

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