US 2004 Legislation regarding the Use of Credit Information in Insurance Resources

US 2004 Legislation regarding the Use of Credit Information in Insurance Resources in United States

US 2004 Legislation regarding the Use of Credit Information in Insurance Resources

 State:  Bill Summary:
 Alabama S.B. 30
Prohibits an insurer from making an underwriting decision based on a credit report.  Allows an insurer to refuse to accept premium payments in installments from a person whose nonpayment of premiums caused a lapse in an insurance policy of the person within two years preceding the date on which the request to pay premiums is made.  Provides for the imposition of civil penalties against insurers who violate this act.
 Alaska H.B. 5
Relates to using credit history or insurance scoring for insurance purposes.
H.B. 47
Relates to using credit rating or credit scoring for insurance purposes.
 Arizona H.B. 2233
Signed by governor 4/1/04, Chapter 31
Prohibits consumer-reporting agencies from providing or selling data or lists that include any personal or privileged information about an individual collected or received in connection with an insurance transaction.  Exempts the insurer’s insurance producer, affiliates or holding companies that are acting on behalf of the insurer.  Specifies that an insurer will not be restricted from obtaining a claims history report or a motor vehicle report.
H.B. 2547
Signed by governor 4/23/04, Chapter 149
Prohibits an insurer from considering any inquiry by an insured as to the terms or coverage of a policy as a basis for declining, non-renewing or canceling insurance.  Prohibits an insurer from submitting that an inquiry was made by the insured regarding the terms or coverage of a policy, to any insurance support organization or consumer-reporting agency.  Specifies that an inquiry is not a claim unless an actual claim is filed by the insured that results in an investigation of the claim by the insurer.
S.B. 1044
Prohibits consideration of an applicant’s credit history for motor vehicle and homeowner insurance.
 California S.B. 1323
Imposes various requirements on an insurer that uses credit information in underwriting or rating a consumer of homeowners’ insurance, including requirements relating to denials of applications, cancellation or nonrenewal of policies, setting of rates, discrimination, prohibited credit factors, updated credit reports, and notification of adverse actions.  Existing law prohibits an insurer from basing an adverse underwriting decision, as defined, on the fact that an individual has previously inquired and received information about the scope or nature of coverage under a residential fire or property insurance policy, if the information is received from an insurance-support organization whose primary source of information is insurance institutions and the inquiry did not result in the filing of a claim.  This bill prohibits an insurer from reporting the fact that an insured has inquired about the nature or scope of coverage under a homeowners’ policy to a database or other record maintained by any of these insurance-support organizations if the inquiry did not result in the filing of a claim.
 Colorado H.B. 1236
Signed by governor 6/4/04, Chapter 398
Requires an insurer offering homeowner’s insurance to provide notice to an applicant:  1) Of a waiting period during which the insurer evaluates the property to be insured, of a decision to not issue a homeowner’s insurance policy or to cancel a conditional policy, and of a decision to extend such waiting period in order to further evaluate the property; 2) If specific underwriting criteria used by the insurer, other than paid claims on the property, adversely affected the applicant; and 3) If the insurer uses credit scoring, claims history of the property, or claims history of the applicant in determining whether to insurer the applicant’s property.  Requires an insurer offering homeowner’s insurance to file with the insurance commissioner its underwriting methodologies.  Requires an insurer to provide to an insured information regarding how to obtain a free loss history information report.  Prohibits an insurer from considering insurance coverage inquiries when setting rates or determining eligibility for homeowner’s insurance.  Prohibits an insurer from providing information regarding claims to an entity other than one that compiles or monitors personal claim or loss experience shared by insurers for underwriting or rating purposes.  Applies to homeowner’s insurance policies issued or renewed on or after January 1, 2005.
H.B. 1292
Signed by governor 6/4/04, Chapter 396
Requires an insurer to provide notice to a potential insured that a binder or policy for homeowner’s insurance is conditional for 30 days if the binder or policy is issued while assessing the risk related to the property.  Requires the insurer to notify the potential insured if the conditional binder or policy is cancelled.  Allows for extension of the 30-day period if there is an articulate and reasonable basis for cancellation of coverage and further investigation or repair to the property is necessary.  Prohibits an insurer from using credit scoring for the acceptance, denial, renewal, or rating of a potential insured for insurance underwriting purposes in connection with homeowner’s insurance.  Requires an insurer to provide to an insured information regarding how to obtain a free loss history information report.  Prohibits an insurer from considering insurance coverage inquiries when setting rates or determining eligibility for homeowner’s insurance.  Prohibits an insurer from providing information regarding claims to an entity other than one that compiles or monitors personal claim or loss experience shared by insurers for underwriting or rating purposes.
S.B. 216
Signed by governor 6/4/04, Chapter 397
Limits when an insurer offering personal lines of property and casualty insurance (homeowners and motor vehicle insurance) may use credit information to rate or underwrite.  Specifies when credit information may not be used.  Outlines how a consumer may receive reimbursement for an overpayment of premium based on erroneous credit information.  Requires disclosure by the insurer if the insurer uses credit information to underwrite or rate an applicant or insured.  If an insurer takes adverse action against an insured, requires the insurer to explain that adverse action has been taken and why the adverse action was taken.  Requires an insurer to file scoring models with the insurance commissioner.  Excludes such information from being a public record upon the insurer’s request.  Indemnifies a producer from liability associated with obtaining or using credit information in a manner that is consistent with the insurer’s policies and applicable law.  Prohibits consumer reporting agencies from selling data submitted in conjunction with an insurance inquiry.  Repeals the prohibition of the use of credit information for the determination of premiums for homeowner’s insurance.
 Indiana S.B. 140
Provides that: (1) a motor vehicle insurance rating plan may not use, as a rating factor, adverse credit report information; and (2) a motor vehicle insurer may not consider adverse credit report information in certain underwriting activities.
S.B. 373
Prohibits use of credit information in connection with insurance coverage.  Repeals certain statutes concerning use of credit information by insurers in connection with the issuance of a personal insurance policy.
 Iowa S.F. 2171
Becomes S.F. 2257 3/4/04
Relates to the use of credit information by property or casualty insurers regulated under Code chapter 515 for the purpose of underwriting or rating risks for personal lines of property and casualty insurance.  The bill applies to insurance that is sold to individuals and families, including but not limited to landowners who are eligible for the family farm tax credit under Code chapter 452A, primarily for noncommercial purposes.  Defines “credit information”, “credit report”, “insurance score”, and related terms for purposes of the bill.  Provides that if an insurer uses credit information for the purpose of underwriting or rating risk, the insurer or the insurer’s agent shall disclose that fact in writing, either on the application for insurance or at the time that the application is taken or at the time of a renewal of insurance, if such notice has not been previously given.  Prohibits an insurer that uses credit information from using an insurance score that is based wholly or in part on income, gender, address, zip code, race, ethnic origin, religion, marital status, or nationality of an applicant or insured.  Prohibits an insurer from canceling, refusing to renew, or rejecting an application for insurance, basing a new or renewal rate for insurance, or taking any other adverse action against an insured or an applicant solely on the basis of credit information.  Prohibits an insurer from taking adverse action against an applicant or insured solely because that person does not have a credit card account or credit history or the insurer is unable to calculate an insurance score.  In addition, an insurer shall not give any consideration to a person’s lack of such credit information unless the insurer either obtains permission from the insurance commissioner, as provided by rule, to consider such information, upon a showing by the insurer that this factor is reasonably related to a calculation of the insurer’s risk or the insurer considers the lack of credit information as neutral credit information, as defined by the insurer.  Prohibits an insurer from taking adverse action against an applicant or insured based on credit information from a credit report or an insurance score that is not current or has not been updated as required by the bill.  Prohibits an insurer from using a methodology to calculate an insurance score that considers certain information a negative factor, such as credit inquiries initiated for the personal use of the applicant or insured, inquiries by other insurers relating to insurance applications or coverage, debt collection accounts for medical services, and multiple inquiries by lenders relating to a home mortgage or automobile loan or application that are made within 30 days.  Provides that if an insurer is notified by a consumer reporting agency or the insured that it has been determined through the dispute resolution process of the federal Fair Credit Reporting Act that the credit information of an insured was incorrect or incomplete, the insurer shall underwrite and rate the insured again within 30 days of receiving such notice by utilizing correct and complete credit information.  If the insurer determines that the insured has overpaid a premium as a result of the mistake, the insurer is required to refund the amount of the overpayment to the insured for either the last 12 months of coverage or the actual policy period, whichever is less.  Specifies how an insurer that takes adverse action against an applicant or insured shall give notification of such adverse action in accordance with the requirements of the federal Fair Credit Reporting Act by giving reasons in clear and specific layman’s language that include a description of at least four factors that formed the primary basis for the insurer’s decision.  Requires an insurer that uses credit information to file certain information with the insurance commissioner, such as the factors used as credit criteria, the methodology for determining an insurance score, and underwriting guidelines used.  The bill also requires an interested party, such as a scoring modeler, to file or discuss methodologies used in determining an insurance score.  Provides  that such information discussed or filed shall be considered confidential and protected as a trade secret under Code §22.7, subsection 3.  Requires insurers to indemnify, defend, and hold harmless all agents and producers of the insurer for any liability that arises out of the use of credit information or insurance scores on behalf of the insurer, so long as such use is done within the scope of the employment of the agent or producer and in compliance with the instructions or procedures established by the insurer and with any applicable law or regulation.  Prohibits a consumer reporting agency from providing or selling information which was obtained or submitted in conjunction with an insurance inquiry about the credit information, credit report, or insurance score of an applicant or insured.  Provides that if any part of the bill or its applicability to any person is held invalid, including because of an interpretation of or a future change in the federal Fair Credit Reporting Act, the invalidity does not affect other provisions or any applicability that can be given effect without the invalid provision or application.  The bill takes effect on July 1, 2004, and applies to insurance contracts or policies delivered, issued for delivery, continued, or renewed in this state on or after October 1, 2004.
H.F. 2257
Signed by governor 4/7/04, Chapter 1039
Relates to the use of credit information for underwriting or rating risks for personal insurance and provides an applicability date.
 Kentucky H.B. 530
Creates a new section of Subtitle 20 of KRS Chapter 304 to prohibit an insurer that uses credit information to underwrite or rate risks from using certain credit inquiries as a negative factor in any insurance score methodology or in reviewing credit information for the purpose of underwriting or rating a policy of personal insurance; defines “personal insurance” as private passenger automobile, homeowners, motorcycle, mobile-homeowners, and noncommercial dwelling fire insurance policies individually underwritten for personal, family, or household use.
 Louisiana H.B. 1449
Prohibits insurers from denying, canceling, or nonrenewing a personal policy or calculating an insured’s renewal rates based solely upon the insured’s credit information.
H.B. 1452
Prohibits insurance companies from obtaining or using credit reports for the issuance of insurance.
S.B. 215
Prohibits certain uses of credit information in establishing rates for personal insurance.
 Maryland H.B. 504
Vetoed by governor – duplicative 5/26/04
Repeals a provision that terminates, at the end of September 30, 2004, a provision that authorizes an insurer that rates a new private passenger motor vehicle insurance policy based on the credit history of the applicant to provide a discount of up to 40 percent or impose a surcharge of up to 40 percent if actuarially justified; and requires the Maryland Insurance Administration to report to specified committees of the General Assembly by December 1, 2004.
H.B. 1222
Prohibits an insurer, with respect to private passenger motor vehicle insurance, from rating a risk based on the credit history of an applicant or insured; repeals provisions of law that authorize an insurer to use the credit history of an applicant to rate a new policy of private passenger motor vehicle insurance.
S.B. 101
Signed by governor 4/27/04, Chapter 91
Repeals a provision that terminates, at the end of September 30, 2004, a provision that authorizes an insurer that rates a new private passenger motor vehicle insurance policy based on the credit history of the applicant to provide a discount of up to 40 percent or impose a surcharge of up to 40 percent if actuarially justified; and requiring the Maryland Insurance Administration to submit a specified report to committees of the Maryland General Assembly by December 1, 2004.
 Massachusetts S.B. 2093
Provides that insurance rates shall not be excessive, inadequate or unfairly discriminatory and shall not be based in part or in whole on the numerical credit rating score of a consumer or on any other credit rating.
S.B. 2465
Relates to insurance rates.
 Michigan H.B. 5803
Creates a new Chapter 21A of the Insurance Code addressing the use of credit information and credit scores in the transaction of personal insurance.
 Mississippi H.B. 756
Died in committee 3/9/04
Prohibits the use of credit scoring to determine whether an applicant will be eligible for a policy of insurance or eligible to open a savings or checking account at a financial institution.
H.B. 1134
Died in committee 3/9/04
Provides that basing insurance rates or eligibility for insurance on the individual’s credit history shall be prohibited as an unfair practice in the business of insurance.
 Missouri H.B. 868
Requires any person owing a fiduciary duty to an insurer who uses credit scoring in its underwriting to submit annually his or her personal credit score to the Department of Insurance.
H.B. 877
Prohibits the use of credit information by insurers in their underwriting of insurance contracts.
H.B. 992
Withdrawn from further consideration 1/12/04
Revises the statutes relating to the use of credit scores by insurance companies.
H.B. 1131
Makes several changes to the laws regarding the use of credit information by insurance companies.  The bill: (1)  Changes the definition of “adverse action” to have the same meaning as provided in federal law.  Adverse action will include cancellation, denial, or non-renewal of personal insurance coverage or any unfavorable change in the terms of coverage, including charging a higher premium; (2)  Adds several specific types of insurance products to the definition of an insurance “contract”; (3)  Repeals a provision that allows insurers to take adverse actions against persons based on an inability to compute their insurance credit scores; (4)  Prohibits an insurer from using loss information in calculating its insurance credit scores if it also uses loss information separately to calculate its rates; (5)  Requires insurers to use underwriting factors other than credit information to underwrite any policy that has been in force for more than 36 months; (6)  Allows any insured to request a current credit report and a re-rating of their policy at each annual renewal; (7)  Prohibits insurers and credit reporting agencies from using as a negative factor in underwriting any credit inquiries not initiated by the insured, collection accounts with a medical industry code, multiple credit inquiries within a 30-day period, the absence of credit history, the use of a particular type of credit or debit card, or a consumer’s total available line of credit; (8)  Requires insurers to file their credit scoring models or processes with the department; and (9)  Makes any insurer’s filing of a model or process related to credit information a trade secret and protected from public disclosure pursuant to Sections 417.450 – 417.467, RSMo.
H.B. 1483
Makes changes to the laws regarding the use of credit information in underwriting auto insurance.  The bill:  (1)  Prohibits insurers from taking any adverse action or determining a person’s insurance premium based upon a credit report or credit score; (2)  Makes the restrictions on insurance credit scoring apply to property insurance and casualty insurance.  Under current law, it applies to property insurance and auto insurance; (3)  Broadens the definition of “credit report” to include oral communications and credit information provided by any source.  Current law applies only to written and electronic communications from consumer reporting agencies; and (4)  Makes it an adverse action for an insurer to offer to write an auto insurance policy through an affiliated insurer.
S.B. 1173
Makes several changes to the laws regarding the use of credit information by insurance companies.  Modifies the definition of “adverse action” to have the same meaning as provided in federal law.  Adverse actions include cancellation, denial, or non-renewal of personal insurance coverage or any unfavorable change in the terms of coverage, including charging a higher premium.  Adds several specific types of insurance products to the definition of an insurance “contract”.  The current law on the use of credit information only applies automobile insurance policies and property insurance policies.  Repeals a provision that allows insurers to take adverse actions against persons based on an inability to compute their insurance credit scores.  Prohibits insurance companies from using loss information in calculating its insurance credit scores if it also uses loss information separately to calculate its rates.  Prohibits insurers from considering an absence of credit information or the inability to calculate an insurance score in underwriting insurance.  Requires insurers to use underwriting factors other than credit information to underwrite any policy that has been in force for more than 36 months.  Allows any insured to request a current credit report and a re-rating of their policy at each annual renewal.  Prohibits insurers and credit reporting agencies from using as a negative factor in underwriting any credit inquiry not initiated by the insured, collection accounts with a medical industry code, multiple credit inquiries within a 30-day period, the absence of credit history, the use of a particular type of credit or debit card, or a consumer’s total available line of credit.  Requires insurers to file their credit scoring models or processes with the department and makes any insurer’s filing of a model or process related to credit information a trade secret and protected from public disclosure pursuant to Sections 417.450 through 417.467, RSMo.
 Nebraska L.R. 294
Studies the territorial insurance rating and the use of credit reports in setting insurance rates.
 New Jersey A.B. 2434
Prohibits property and casualty insurers doing business in New Jersey from using information from an individual’s consumer report or credit score as an underwriting factor in determining the individual’s premium rate, whether to decline or terminate an individual’s coverage, or whether to limit the amount or type of coverage.  Defines “consumer report” as any written, oral or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for credit or insurance.  The term “credit score” is defined as a numerical value or categorization derived from a statistical tool or modeling system used to predict the likelihood of certain credit behaviors.  Because it is unclear whether credit information is being properly utilized by insurers, this bill prohibits insurers from using that information in the underwriting process.
 New Mexico H.B. 442
Enacts the insurance credit information act; regulates the use of credit information for personal insurance.
S.B. 509
Enacts the insurance credit information act; regulates the use of credit information for personal insurance.
S.B. 592
Prohibits certain actions by motor vehicle and homeowner insurers relating to the use of credit history.
 New York A.B. 4754
Substituted by S.B. 5618 6/22/04
S.B. 5618
Signed by governor 6/27/04, Chapter 215
Enacts provisions relating to the use of credit information by personal line insurers and affiliates; defines terms; provides for certain notification, dispute resolutions and error correction procedures; requires filing by insurers of scoring models.
 Ohio S.B. 151
Signed by governor 6/24/04
Prohibits consumer reporting agencies from disclosing certain information obtained from insurer inquiries, and indemnifies licensed resident insurance agents for liability resulting from the use of credit information or insurance scores for an insurance company.
 Rhode Island H.B. 7705
Prohibits the use of credit reports in connection with a consumer’s application for insurance.
H.B. 8269
Prohibits the use of credit reports in connection with a consumer’s application for insurance.
 South Carolina S.B. 686
Signed by governor 7/29/04, Act 290
Enacts the “Property and Casualty Insurance Personal Lines Modernization Act”, so as to change the rate approval process regarding property and casualty insurance filings, authorizes the consumer advocate to have access to certain filings, including a response by the Department of Consumer Advocate to the Department of Insurance containing its opinion on the filing, and may appeal the decision of the department to the administrative law judge division, and requires the director of the department to utilize or develop a consumer information system to disseminate certain information to purchasers of homeowner’s, private passenger nonfleet automobile, or property insurance for personal, family, or household needs; provides regulation of property insurance, cancellation and nonrenewals, to ensure that rates are not excessive, inadequate, or unfairly discriminatory, authorizes the regulation of cooperative action among insurers in ratemaking, authorizes the director of the Department of Insurance to evaluate natural hazard catastrophe models that are used for rate filings; adds the definitions of “insurance-support organization” and “modeling organization”; provides that the absence of credit information for fire and allied lines and inland marine insurance and automobile insurance may be used by an insurer for underwriting purposes if the insurer presents information satisfactory to the director that the absence is related to the risk.
 Tennessee H.B. 2339
S.B. 2259
Signed by governor 4/13/04, Chapter 527
Regulates use of consumer credit information by an insurer in calculating premium for certain types of personal insurance; requires information to be filed with department of commerce and insurance regarding use of consumer credit information.
H.B. 2349
S.B. 2338
Regulates the use of consumer credit information by an insurer in rating, renewing, denying or canceling certain types of personal insurance; requires information to be filed with the department of commerce and insurance regarding the use of consumer credit information.
 Utah H.B. 221
Enacting clause struck 3/4/04
Prohibits use of credit information for any purpose related to personal lines insurance; and  repeals existing provisions addressing credit information.
S.B. 52
Signed by governor 3/23/04, Chapter 266
Prohibits the use of certain losses in making adverse eligibility or rate decisions; prohibits use of inquiries for certain insurance purposes; and makes technical changes.
 Virginia H.B. 833
Continued to 2005 session
Prohibits the cancellation of a policy of insurance on an owner-occupied dwelling when such policy is issued prior to closing and the decision to cancel is based solely on information obtained from the Comprehensive Loss Underwriting Exchange or credit information contained in a consumer report.  The bill also requires an insurer to make a decision as soon as practicable regarding insurance on an owner-occupied dwelling that is being purchased and, if approved, issue a binder for such coverage and not delay closing the purchase of the dwelling.
 Washington H.B. 2727
Signed by governor 3/22/04, Chapter 86
S.B. 6381
Requires that insurers who use credit history to determine personal insurance rates or eligibility for coverage must file rates and rating plans with the commissioner for those lines of coverage for which credit scoring is used. This applies to a single insurer and to two or more affiliated insurers.  An insurer’s eligibility rules or guidelines, filed with the Commissioner, are not subject to public disclosure.
 West Virginia H.B. 4488
S.B. 545
Prohibits the use of a credit score in casualty insurance rate filings.
H.C. R. 31
Adopted 3/10/04
Requests the Joint Committee on Government and Finance to study the use of credit scoring to be used as a factor in determining the amount of a premium charged for issuance of an insurance policy.
S.C.R. 63
Passed Senate 3/8/04
Requests the Joint Committee on Government and Finance study the use of credit scoring in the insurance underwriting and rate-making process.
 Wisconsin A.B. 278
Failed to pass pursuant to Senate Joint Resolution 1 3/31/04
Prohibits an insurer from considering information in an individual’s credit report for purposes of issuing or renewing motor vehicle or property insurance, including renter’s and homeowner’s insurance, or setting premiums for motor vehicle or property insurance.  Prohibits a rating plan for motor vehicle or property insurance from using information in an individual’s credit report as a rating factor.
 Wyoming H.B. 40
Signed by governor 3/4/04, Chapter 57
Imposes restrictions relating to issuance, renewal and cancellation of certain contracts of insurance as specified; restricts the use of credit information in insurance.

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