For the purposes of this Act, these defined words have the following meaning:
A. Adverse Action—A denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of personal insurance.
B. Affiliate—Any company that controls, is controlled by, or is under common control with another company.
C. Applicant—An individual who has applied to be covered by a personal insurance policy with an insurer.
D. Consumer—An insured whose credit information is used or whose insurance score is calculated in the underwriting or rating of a personal insurance policy or an applicant for such a policy.
E. Consumer Reporting Agency—Any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties.
F. Credit Information—Any credit-related information derived from a credit report, found on a credit report itself, or provided on an application for personal insurance. Information that is not credit-related shall not be considered "credit information," regardless of whether it is contained in a credit report or in an application, or is used to calculate an insurance score.
G. Credit Report—Any written, oral, or other communication of information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing or credit capacity which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor to determine personal insurance premiums, eligibility for coverage, or tier placement.
H. Insurance Score—A number or rating that is derived from an algorithm, computer application, model, or other process that is based in whole or in part on credit information for the purposes of predicting the future insurance loss exposure of an individual applicant or insured.
An insurer authorized to do business in [insert State] that uses credit information to underwrite or rate risks, shall not:
A. Use an insurance score that is calculated using income, gender, address, zip code, ethnic group, religion, marital status, or nationality of the consumer as a factor.
B. Deny, cancel or nonrenew a policy of personal insurance solely on the basis of credit information, without consideration of any other applicable underwriting factor independent of credit information and not expressly prohibited by Section 5(A).
C. Base an insured’s renewal rates for personal insurance solely upon credit information, without consideration of any other applicable factor independent of credit information.
D. Take an adverse action against a consumer solely because he or she does not have a credit card account, without consideration of any other applicable factor independent of credit information.
E. Consider an absence of credit information or an inability to calculate an insurance score in underwriting or rating personal insurance, unless the insurer does one of the following:
1. Treat the consumer as otherwise approved by the Insurance Commissioner/Supervisor/Director, if the insurer presents information that such an absence or inability relates to the risk for the insurer.
2. Treat the consumer as if the applicant or insured had neutral credit information, as defined by the insurer.
3. Exclude the use of credit information as a factor and use only other underwriting criteria.
F. Take an adverse action against a consumer based on credit information, unless an insurer obtains and uses a credit report issued or an insurance score calculated within 90 days from the date the policy is first written or renewal is issued.
G. Use credit information unless not later than every 36 months following the last time that the insurer obtained current credit information for the insured, the insurer recalculates the insurance score or obtains an updated credit report. Regardless of the requirements of this subsection:
1. At annual renewal, upon the request of a
consumer or the consumer's agent, the insurer shall re-underwrite and re-rate
the policy based upon a current credit report or insurance score. An insurer
need not recalculate the insurance score or obtain the updated credit report of
a consumer more frequently than once in a twelve-month period.
2. The insurer shall have the discretion to
obtain current credit information upon any renewal before the 36 months, if
consistent with its underwriting guidelines.
3. No insurer need obtain current credit
information for an insured, despite the requirements of subsection (G)(1), if
one of the following applies:
(a) The insurer is treating the consumer as otherwise
approved by the Commissioner.
(b) The insured is in the most favorably-priced tier
of the insurer, within a group of affiliated insurers. However, the insurer
shall have the discretion to order such report, if consistent with its
underwriting guidelines.
(c) Credit was not used for underwriting or rating
such insured when the policy was initially written. However, the insurer shall
have the discretion to use credit for underwriting or rating such insured upon
renewal, if consistent with its underwriting guidelines.
(d) The insurer re-evaluates the insured beginning no
later than 36 months after inception and thereafter based upon other
underwriting or rating factors, excluding credit information.
H. Use the following as a negative factor in any insurance scoring
methodology or in reviewing credit information for the purpose of underwriting
or rating a policy of personal insurance:
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1. Credit inquiries not initiated by the consumer or inquiries requested by the consumer for his or her own credit information.
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2. Inquiries relating to insurance coverage, if so identified on a consumer's credit report.
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3. Collection accounts with a medical industry code, if so identified on the consumer's credit report.
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4. Multiple lender inquiries, if coded by the consumer reporting agency on the consumer's credit report as being from the home mortgage industry and made within 30 days of one another, unless only one inquiry is considered.
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5. Multiple lender inquiries, if coded by the consumer reporting agency on the consumer's credit report as being from the automobile lending industry and made within 30 days of one another, unless only one inquiry is considered.
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If it is
determined through the dispute resolution process set forth in the federal Fair
Credit Reporting Act, 15 USC 1681i(a)(5), that the credit information of a
current insured was incorrect or incomplete and if the insurer receives notice
of such determination from either the consumer reporting agency or from the
insured, the insurer shall re-underwrite and re-rate the consumer within 30
days of receiving the notice. After re-underwriting or re-rating the insured,
the insurer shall make any adjustments necessary, consistent with its
underwriting and rating guidelines. If an insurer determines that the
insured has overpaid premium, the insurer shall refund to the insured the
amount of overpayment calculated back to the shorter of either the last 12
months of coverage or the actual policy period.
A.
If an insurer writing personal insurance
uses credit information in underwriting or rating a consumer, the insurer or
its agent shall disclose, either on the insurance application or at the time
the insurance application is taken, that it may obtain credit information in
connection with such application. Such disclosure shall be either written
or provided to an applicant in the same medium as the application for
insurance. The insurer need not provide the disclosure statement required
under this section to any insured on a renewal policy, if such consumer has
previously been provided a disclosure statement.
B.
Use of the following example disclosure
statement constitutes compliance with this section: “In connection with
this application for insurance, we may review your credit report or obtain or
use a credit-based insurance score based on the information contained in that
credit report. We may use a third party in connection with the
development of your insurance score.”
If an
insurer takes an adverse action based upon credit information, the insurer must
meet the notice requirements of both (A) and (B) of this subsection. Such
insurer shall:
A. Provide notification to the consumer that an adverse action has been
taken, in accordance with the requirements of the federal Fair Credit Reporting
Act, 15 USC 1681m(a).
B. Provide notification to the consumer explaining the reason for
the adverse action. The reasons must be provided in sufficiently clear
and specific language so that a person can identify the basis for the insurer’s
decision to take an adverse action. Such notification shall include a
description of up to four factors that were the primary influences of the
adverse action. The use of generalized terms such as “poor credit
history,” “poor credit rating,” or “poor insurance score” does not meet the
explanation requirements of this subsection. Standardized credit
explanations provided by consumer reporting agencies or other third party
vendors are deemed to comply with this section.
A. Insurers that use insurance scores to underwrite and rate risks must file their scoring models (or other scoring processes) with the Department of Insurance. A third party may file scoring models on behalf of insurers. A filing that includes insurance scoring may include loss experience justifying the use of credit information.
B. Any filing relating to credit information is considered trade secret under [cite to the appropriate state law].
Section 10. Indemnification
An insurer shall indemnify, defend, and hold agents harmless from and against
all liability, fees, and costs arising out of or relating to the actions,
errors, or omissions of [an agent / a producer] who obtains or uses credit
information and/or insurance scores for an insurer, provided the [agent /
producer] follows the instructions of or procedures established by the insurer
and complies with any applicable law or regulation. Nothing in this
section shall be construed to provide a consumer or other insured with a cause
of action that does not exist in the absence of this section.
Section 11. Sale of Policy Term Information by
Consumer Reporting Agency
A. No consumer reporting agency shall provide or sell data or
lists that include any information that in whole or in part was submitted in
conjunction with an insurance inquiry about a consumer’s credit information or
a request for a credit report or insurance score. Such information
includes, but is not limited to, the expiration dates of an insurance policy or
any other information that may identify time periods during which a consumer’s
insurance may expire and the terms and conditions of the consumer’s insurance
coverage.
B. The restrictions provided in subsection (A) of this section do
not apply to data or lists the consumer reporting agency supplies to the
insurance [agent / producer] from whom information was received, the insurer on
who’s behalf such [agent / producer] acted, or such insurer’s affiliates or
holding companies.
C. Nothing in
this section shall be construed to restrict any insurer from being able to
obtain a claims history report or a motor vehicle report.
Section
12. Severability
If any
section, paragraph, sentence, clause, phrase, or any part of this Act passed is
declared invalid due to an interpretation of or a future change in the federal
Fair Credit Reporting Act, the remaining sections, paragraphs, sentences,
clauses, phrases, or parts thereof shall be in no manner affected thereby but
shall remain in full force and effect.
This Act shall take effect on [insert date], applying to personal
insurance policies either written to be effective or renewed on or after 9
months from the effective date of the bill.
