In recent weeks, The Dallas Morning News, in both news reports and editorials, has inveighed against property and casualty insurers for employing a premium rate setting technique called "credit scoring."

Readers, including those both familiar and unfamiliar with the phrase, are left with the unmistakable impression that credit scoring unfairly raises premium rates for certain insurance consumers and at the same time implies that insurers might be involved in some unscrupulous insurance practice for personal gain.

Other Texas newspapers, including The Austin American-Statesman, satisfied with the potential shock value of such information, reprinted the credit scoring editorial for their own readers.

Seemingly unconcerned about fact-checking, and anticipating that a patient and tolerant insurance industry would not register opposition, the Statesman’s reprint enhanced the impact of the editorial by increasing circulation of the report.

Credit scoring is the phrase applied to a numerical ranking based upon a person’s credit history. Individual credit scores improve or degrade depending upon matters such as amount of outstanding personal debts, late payments and bankruptcies. Decades of underwriting insurance have proven that credit scoring to be reliably accurate in predicting risks and claims activity.

In analyzing individual credit histories, financial activities within the past 12 months are given most weight. A good score typically is above 760 and a bad one is under 600. Age, gender, race, ethnic group, address, income, marital status, and nationality are irrelevant in analyzing credit scores. It is unlawful to utilize these personal characteristics in setting premium rates.

Statistically, people who have poor insurance scores are more likely to file claims. Insurance scores help insurers differentiate between lower and higher insurance risks and thus charge a premium equal to the risks they are assuming.

Good credit scores almost always initiate premium rate discounts. But contrary to what has been written in The News, poor credit scores do not "drive up insurance rates." Instead, low credit scores are a factor in awarding discounts enjoyed by insurance consumers with high scores.

By law in every state, insurers are prohibited from setting rates which unfairly discriminate against individuals. But now, the author of the credit score report in the DMN introduces the ugly specter of potential civil rights violations by insurers who use the credit scoring technique.

DMN reporter Terrence Stutz wrote: "Consumer groups and civil rights advocates argue that the practice unfairly burdens lower-income families, particularly minorities, who are paying far more because of a single factor that has little to do with what drives the cost of auto and homeowners insurance."

Low-income families, and those identified as racial minorities, are not applicable factors in the setting of auto and homeowners insurance rates, Mr. Stutz. It is against the law to do so. By suggesting that family income and minority status are applicable in insurance scoring, Mr. Stutz questions the ethical conduct of the entire insurance industry.

Never mind that banks, credit card companies, mortgage companies, landlords, employers, retail stores and myriad others also use credit scoring for business purposes. Their opportunities to be researched, written about, and editorialized upon by The News may come soon enough.

Mr. Stutz and The News finally concede that extensive research, in Texas and elsewhere, praised the values and reliability of credit scoring and dismissed all the discriminatory practices on the part of insurers in the use the scores. He said such scores can predict "the probability of how many claims a customer may file but not the total cost of claims." He simply will not give up.

(Of course, predicting the "total cost of claims," understandably is an impossible and insulting demand to make of insurers. Mr. Stutz should know that.)

For example, the Federal Trade Commission (FTC), in July 2007, reported that insurance credit scoring "cannot easily be used as a proxy for race and ethnic origin." In other words, setting premium rates using credit scoring techniques are no different for members of minority groups than they are for members of non-minority groups.

Similar conclusions, alleging credit scoring discrimination by insurers, were dismissed in Texas studies conducted in recent years by the Texas Department of Insurance (TDI), the University of Texas, Texas A&M University, and the Office of Public Insurance Council. The findings, published in 2004 and 2005, confirm the results of other studies.

An editorial in the Oct. 22 News revealed that: "Auto and homeowners rates in Texas are SKY HIGH" (emphasis added). The newspaper didn’t want to get more specific. Children might be reading this.

The editorial also stated that: "Credit scoring is far from an EXACT SCIENCE" (emphasis added). Should any insurers ever claim that credit scoring is an "exact science," their names should be published in The News.

Finally, the editorial claims: "There is evidence that minority and low income customers are particularly vulnerable to sudden insurance rate increases triggered by credit scoring." Wow! Insurance regulators would love see that "evidence." It could prove that insurance companies are keeping sales records according to family income, race, and ethnic group.

Isn’t that against the law? Huh?