US 2006 Legislation regarding the Use of Credit Information in Insurance Resources

US 2006 Legislation regarding the Use of Credit Information in Insurance Resources in United States

US 2006 Legislation regarding the Use of Credit Information in Insurance Resources

 State:  Bill Summary:
 Arizona H.B. 2160
Prohibits an insurance institution that uses credit information to underwrite or rate risks from:  1) Denying, canceling or not renewing a policy of personal insurance based solely on credit information without first considering any other applicable underwriting factor independent of credit information and not otherwise expressly prohibited.  2) Basing an individual’s renewal rate for personal insurance on credit information without considering any other applicable factor independent of credit information.  3) Taking an adverse action against an individual, based on credit information, unless the insurance institution obtains and uses a consumer report that is issued or an insurance score calculated within 90 days from the date the policy is first written or a renewal is issued.  4) Using 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 insurance:  (a) Credit inquiries not initiated or requested by the individual for the individual’s own credit information.  (b) Inquires relating to insurance coverage if identified on the individual’s consumer report.  (c) Collection accounts with a medical industry code if so identified on the individual’s consumer report.  (d) Multiple lender inquiries, if coded by the consumer reporting agency on the individual’s consumer report as being from the home mortgage industry and made within thirty days of one another, unless only one inquiry is considered.  (e) Multiple lender inquiries, if coded by the consumer reporting agency on the individual’s consumer report as being from the automobile lending industry and made within thirty days of one another, unless only one inquiry is considered.  Prohibits an insurance institution that uses credit information to underwrite or rate risks from using the credit information unless no later than every 36 months following the last time that the insurance institution obtained current credit information for the individual, the insurance institution recalculates the insurance score or obtains an updated consumer report.  Requires that the insurance institution reunderwrite and rerate the individual if it is determined through the dispute resolution process prescribed in the Federal Fair Credit Reporting Act (15 United States Code §1681 i(a)(5)) that the credit information of the individual was incorrect or incomplete and if the insurance institution receives notice of the determination from either the consumer reporting agency or from the individual.  This must take place within 30 days of receiving the notice.  Stipulates that after reunderwriting or rerating the individual, the insurance institution shall make any necessary adjustments that are consistent with its underwriting and rating guidelines.  Requires an insurance institution that uses an insurance score to underwrite and rate risks file the insurance institution’s scoring model or other scoring processes with the Department of Insurance and specifies that any filing relating to credit information is considered a trade secret under applicable law.  Stipulates that an insurance institution shall indemnify, defend and hold insurance producers harmless from and against all liability, fees and costs that arise out of or relating to the actions, errors or omissions of an insurance producer who obtains or uses credit information or insurance scores for an insurance institution, if the insurance producer follows the instructions or procedures established by the insurance institution and complies with any applicable law or regulation.
H.B. 2161
Prohibits the use of credit scores, credit ratings, or credit reports to underwrite, classify or rate insurance policies in this state.  Repeals provisions regarding notification of adverse underwriting decisions based on credit related information.
 California A.B. 1454
Died pursuant to Art. IV, Sec. 10(c) of the Constitution 1/31/06
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 S.B. 109
Passed Senate 3/29/06
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 property and casualty insurance.
 Delaware S.B. 2
Substituted 3/30/06
Prohibits the discriminatory practice of credit scoring with respect to the issuance, renewal, and risk-rating of automobile and homeowners insurance policies.
S.S. 1 for S.B. 2
Passed Senate 4/4/06
Creates restrictions upon the use of credit information in the provision of insurance for automobiles, motorcycles, boats and personal watercraft, recreational vehicles, homeowners, and certain other types of insurance. Charges the Department of Insurance with promulgating regulations to implement the Act.
S.B. 284
Enacts the model act regarding the use of credit information in personal insurance.
 Iowa H.F. 2019
Amends Code section 515.109A to prohibit the use of credit information by insurers for underwriting or rating risks for personal insurance.  Currently, the use of credit information for such purposes is allowed under certain circumstances.  Uses of credit information prohibited by the bill include using an insurance score; denying issuance of, canceling, or refusing to renew a personal insurance policy based on any consideration of credit information; basing a consumer’s insurance renewal rates on any consideration of credit information; taking any adverse action against a consumer based on any consideration of the fact that the consumer does not have a credit card account; considering an absence of credit information or an inability to calculate an insurance score in underwriting or rating personal insurance; and taking any adverse action against a consumer based on credit information.  For purposes of the bill, “adverse action” means a denial of issuance, cancellation, or refusal to renew, an increase in any charge for, or a reduction or other unfavorable change in the terms of coverage or amount of any personal insurance existing or applied for, or in connection with, the underwriting of personal insurance.  Provides that a violation of Code section 515.109A is an unfair insurance practice as provided in Code chapter 507B and the proceedings, orders, and penalties contained in Code chapter 507B are applicable to violations of the bill.  The bill is applicable to personal insurance contracts or policies delivered, issued for delivery, continued, or renewed in this state on or after October 1, 2006.
S.F. 2245
Amends Code section 515.109A to prohibit the use of credit information by insurers for underwriting or rating risks for personal insurance.  Changes the definition of personal insurance to include term life insurance policies issued under Code chapter 508, and accident and health insurance policies issued under Code chapter 514A.  Uses of credit information prohibited by the bill include using an insurance score; denying issuance, canceling, or refusing to renew a personal insurance policy based on any consideration of credit information; basing a consumer’s insurance renewal rates on any consideration of credit information; taking any adverse action against a consumer based on any consideration of the fact that the consumer does not have a credit card account; considering an absence of credit information or an inability to calculate an insurance score in underwriting or rating personal insurance; and taking any adverse action against a consumer based on credit information.  For purposes of the bill, “adverse action” means a denial of issuance, cancellation, or refusal to renew, an increase in any charge for, or a reduction or other unfavorable change in the terms of coverage or amount of any personal insurance existing or applied for, or in connection with, the underwriting of personal insurance.  Provides that a violation of Code section 515.109A is an unfair insurance practice as provided in Code chapter 507B and the proceedings, orders, and penalties contained in Code chapter 507B are applicable to violations of the bill.  The bill is applicable to personal insurance contracts or policies delivered, issued for delivery, continued, or renewed in this state on or after October 1, 2006.
 Kansas S.B. 197
Died in committee 5/25/06
Repeals the Kansas Insurance Score Act, which prohibits insurance companies from using certain consumer credit information in decisions to underwrite or rate risks.
S.B. 198
Died in committee 5/25/06
Amends the Kansas Insurance Score Act to provide that any violation of the act would also be considered an unfair or deceptive act or practice under KSA 40-2404.  Requires that any violation of the Kansas Insurance Score Act be subject to any and all of the enforcement provisions of the Kansas Consumer Protection Act.  Allows persons alleging a violation of the Kansas Insurance Score Act to bring a private action to seek relief for damages caused by the violation.
 Louisiana H.B. 318
Signed by governor 6/29/06, Act 688
Prohibits insurers from using 2005 credit information to underwrite or rate risk for persons who resided in declared disaster areas in 2005.
S.B. 298
Restricts the use of credit scores as a criteria in underwriting personal insurance in areas impacted by hurricanes Katrina and Rita.
S.B. 436
Prohibits credit scoring and information concerning a person’s credit worthiness in determining whether or not to issue or renew a policy or personal liability insurance.  Authorizes the use of such information for the purpose of determining the interest rate to be charged when financing the premium payment.
 Massachusetts H.B. 3056
Relates to the use of credit-based insurance scoring for underwriting and rating of insurance.
 Michigan S.B. 233
Amends the Insurance Code to provide that proposed administrative rules R 500.2151 through R 500.2155 (which would prohibit insurance credit scoring) would be rescinded upon their effective date, pursuant to Section 45a(3)(a) of the Administrative Procedures Act (APA).
 Minnesota H.F. 2578
S.F. 2361
Prohibits the use of consumer credit scores and history by insurers underwriting automobile insurance policies.
 Mississippi H.B. 117
Died in committee 1/31/06
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.
 Missouri H.B. 1116
Prohibits insurers from using credit information when underwriting insurance contracts.
H.B. 1129
Requires fiduciaries of insurers who use credit scoring in underwriting to annually submit their personal credit score to the Department of Insurance.
H.B. 1280
Changes the laws regarding property insurance and the Basic Property Insurance Inspection and Placement Program.  Regarding property insurance, the bill:  (1)  Clarifies that the definition of a property insurance “claim” does not include an inquiry as to whether a particular loss is covered by the policy; (2)  Prohibits property insurers from using an inquiry of whether a particular loss is covered as a basis for the non-renewal of a policy; (3)  Requires that when a property insurance policy is canceled because of an increase in risk due to a physical change in the property, that physical change must be significant; (4)  Increases the notice period for cancellation of a property insurance policy from 30 days to 60 days; (5)  Prohibits a property insurer from citing a generalized term of “poor credit history” when explaining the reason for cancellation or non-renewal of a policy; (6)  Prohibits insurers from using weather-related claims as a basis for non-renewal of a policy.  A “weather-related claim” is defined as any loss resulting from an act of God which an insured is unable to reduce the risk; and (7)  Prohibits property insurers from using a rating system that surcharges an insured for weather-related claims or inquires regarding coverage.  Regarding the Basic Property Insurance Inspection and Placement Program, the bill: (1)  Changes the name of the program to the Fair Access to Insurance Requirements (FAIR) Plan; (2)  Increases the maximum liability limits for the plan from $200,000 to $300,000 for residential property and from $1 million to $3 million for commercial property; (3)  Requires the facility (the association of insurers that administers the FAIR Plan) to provide, upon request, a list of all those insured by the plan; (4)  Makes all policies issued under the FAIR Plan subject to the Unfair Claim Settlement Practices Act and the Unfair Trade Practices Act; (5)  Requires that when a policy is canceled because of a physical change in the property, the Department of Insurance must be provided a copy of the findings at least 10 days before the cancellation takes effect; (6)  Requires that the facility must provide the insured with the actual reason for any cancellation or non-renewal.  The reason must be given in clear and specific language that a person of normal intelligence can understand; and (7)  Adds two members, appointed by the governor, to the governing committee of the facility to represent consumers.
S.B. 598
Makes several changes to the laws regarding the use of credit information by insurance companies.  This act 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.  This act 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.  This act also 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.
 New Jersey A.B. 787
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.
A.B. 3521
S.B. 2327
Requires the Department of Banking and Insurance to conduct an investigation of practices of the automobile insurance industry in regard to increases in premiums for drivers who have had motor vehicle driver’s license suspensions for any reason – either driving related or not. Further, the commissioner is to investigate the use of credit ratings in determining premiums for drivers. In performing its investigation, the Department of Banking and Insurance is to determine whether increases are justified for offenses not related to driving or credit ratings.
 New York A.B. 1321
S.B. 6372
Provides that no insurer shall take into consideration or include in any calculation or formula for the making of homeowners’ insurance rates, the credit history of any person, nor shall any person be denied homeowners’ insurance as a result of such credit history.
A.B. 6771
Provides that the term “defined violation” shall mean the utilization by an insurer of credit information relating to a potential insured in determining the premium to be charged such insured.
A.B. 10188
Requires commercial lines insurers to provide notice to consumers when credit information is used in the rating or underwriting of such insurance.
A.B. 11710
S.B. 8102
Establishes that a security freeze on a consumer’s credit report shall not apply to any person or entity for use in setting or adjusting a rate, adjusting a claim or underwriting for insurance purposes.
 Oklahoma H.B. 2642
Prohibits the use of credit information for certain purposes.
S.B. 1018
Prohibits the use of credit information to underwrite or rate risks in insurance.
 Pennsylvania H.B. 1060
Creates the Use of Credit Information in Personal Lines Insurance Underwriting Act.
H.B. 2554
Provides for the use of credit information in personal lines insurance underwriting, for limitations on the use of credit information, for dispute resolution and error correction, for notification and reunderwriting requirements, for adverse action notification and for violations.
H.B. 3025
Includes using a change in an insured’s credit history, credit rating or a credit scoring model to increase a premium, assess a premium surcharge or refuse to renew the policy as an unfair method of competition and unfair or deceptive act or practice.
 Rhode Island H.B. 6818
Prohibits the use of credit reports in connection with a consumer’s application for insurance.
 South Carolina H.B. 4321
Provides that an individual with no credit history may not be refused underwriting, cancellation, renewal of a policy, assignation to a rating tier, the placing of a person with an affiliated company, or requiring a particular payment plan with regard to a homeowner’s insurance policy; and makes a violation an unfair trade practice.
 Washington H.B. 1928
S.B. 5275
Passed Senate 3/3/05
Provides that, at renewal, an insurer shall not use a policyholder’s updated credit history to determine premium when the updated credit history is less favorable to the policyholder than the prior credit history.  Nothing in this act shall be construed to prevent an insurer from using factors other than a policyholder’s updated credit score in determining premium increases, or to prevent inclusion of a policyholder’s prior credit history in premium decisions at renewal.
H.B. 2434
Provides that, at renewal, an insurer shall not use a policyholder’s updated credit history to determine premium when the updated credit history is less favorable to the policyholder than the prior credit history.  Nothing in this act shall be construed to prevent an insurer from using factors other than a policyholder’s updated credit history in determining premium increases, or to prevent inclusion of a policyholder’s prior credit history in premium decisions at renewal.
 West Virginia H.B. 2077
S.B. 168
Prohibits the use of a credit score in casualty insurance rate filings.
H.B. 2863
Prohibits the use of credit scoring as a consideration in calculating insurance rates in homeowners or automobile liability policies.
H.B. 4263
Limits the use of a credit score in casualty insurance rate filings.
H.B. 4281
Relates to consumer protection generally; ensures clean credit information and identity theft protection; defines certain terms; provides a security freeze procedure; provides protection for credit header information; establishes a right to file a police report on identity theft; declaration of innocence for crimes committed by identity thieves; consumer credit monitoring; security breaches; protection of Social Security numbers; prohibits credit scoring and insurance scoring for use in insurance decisions; requires adequate destruction of certain personal records; and provides for fines, criminal penalties and civil actions for violations.
H.B. 4423
Prohibits the use of a person’s credit history in insurance transactions.
H.B. 4827
Prohibits the number of inquiries reflected in a credit report, credit score report or CLUE report from adversely affecting an application for insurance; and, prohibits reliance on information which is false or potentially false.
S.B. 416
Prohibits the use of a person’s credit history in insurance transactions.

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