Use of Credit Information in Insurance 2010 Legislation

Last Updated: November 24, 2010

NCSL Staff Contact: Heather Morton, (303) 364-7700, Denver

For the last several years, insurance companies have been using credit information to determine a consumer's level of risk before selling or renewing auto, home or renter insurance policies.  The insurance companies believe that there is a direct correlation between a consumer's financial stability and risk of filing an insurance claim.  Insurers may use a consumer's credit score as one factor in assigning premiums, deciding whether to accept or decline coverage or in the decision to place a consumer with a nonstandard (generally higher priced) insurer.

In 2010, legislators in 25 states introduced legislation regarding the use of credit information in insurance. Seven states—Arizona, Connecticut, Iowa, Kansas, Minnesota, New Hampshire and Oklahoma—enacted legislation.

Related NCSL Web Pages:

AZ | CT | FLIAKS | LA | MD | MA | MI | MN | MS | MONH | NJ | NM | NY | OH | OKRI | SC | TN | VA | WA | WV | WI
STATE
BILL SUMMARY
Alabama
none
Alaska
none
Arizona

H.B. 2308
Signed by governor 4/9/10, Chapter 38
Expands the definition of insurance transaction to include transfers of business in A.R.S. §20-2102.

 

S.B. 1399
Provides that an insurer may not access an applicant's or insured's credit ratings, credit reports, credit scoring models or credit information for any reason. Notwithstanding any other law, an insurer may not use credit ratings, credit reports, credit scoring models or credit information to underwrite, classify or rate insurance policies in this state. Provides that an insurer may not condition the receipt or issuance of an insurance contract or policy on the insured granting the insurer access to the insured's credit information. An insurer may not cancel or renew or refuse to issue an insurance policy based on credit ratings, credit reports, credit scoring models or credit information.

Arkansas
none
California
none
Colorado
none
Connecticut

H.B. 5014
Signed by governor 5/5/10, Public Act 10-7
This act codifies and amends the Insurance Department's guidelines on how insurers can use a person's credit history when underwriting or rating a personal risk insurance policy (e. g. , homeowners or private passenger nonfleet automobile (auto)). It also makes numerous changes in laws relating to auto insurance. Specifically, the act: 1. requires an auto insurer to allocate certain expenses on a “flat dollar basis” when determining policy rates; 2. requires auto insurance rating plans that use territorial classifications to assign a weight of 75 percent to individual loss-costs and 25 percent to state wide average loss-costs, as currently required by Insurance Department guidelines; 3. requires the insurance commissioner to adopt regulations regarding underwriting and rating auto insurance policies; 4. requires an insurer that cancels an auto insurance policy in accordance with law to give written cancellation notice to any lienholder listed in the insurer's records as having a legal interest in the motor vehicle; 5. requires a person whose vehicle has been impounded for not having the required registration to present a valid registration and current auto insurance identification card to regain possession of the vehicle; 6. allows an auto insurer to use any publicly available auto industry source approved by the commissioner to determine a totaled vehicle's retail value; 7. requires an auto insurer to give a claimant details on how it calculated a totaled vehicle's loss value, including how to dispute the settlement through the Insurance Department; and 8. increases, from 10 percent to 15 percent per year, the interest an arbitrator the Insurance Department uses to resolve a settlement dispute between an auto insurer and claimant must award when the decision favors the consumer.

Delaware
none
District of Columbia
none
Florida
H.B. 771
Died in committee 4/30/10
Died in committee 4/30/10
Prohibits an insurer that issues motor vehicle insurance from using a rate, rating schedule, rating manual, or an underwriting rule that is not contained in a rating manual and is determined in whole or in part on the basis of certain characteristics of an insured. Prohibits the use by insurers of credit reports and credit scores in making rating determinations. Deletes provisions authorizing the Financial Services Commission to adopt rules.
Georgia
none
Guam
none
Hawaii
none
Idaho
none
Illinois
none
Indiana
none
Iowa

H.F. 2279
Prohibits an insurer from using multiple inquiries for credit reports not initiated by the consumer or initiated by the consumer for the consumer's own credit information, as a negative factor in any insurance scoring methodology or in reviewing credit information for the purpose of underwriting or rating a personal insurance policy.

 

S.F. 2075
Signed by governor 3/19/10
This bill requires an insurer to provide reasonable exceptions to the insurer's rates, rating classifications, company or tier placement, or underwriting rules or guidelines upon the written request of an applicant for insurance or an insured whose credit information has been directly influenced by specified extraordinary life circumstances. An insurer may require such a consumer to provide reasonable written and independently verifiable documentation of the event and to demonstrate the direct and meaningful impact of the event on the consumer's credit information. An insurer is required to inform the consumer of the outcome of such a request within 30 days of receiving documentation of an extraordinary event, in writing or in the same medium as the request. Insurers are required to notify consumers that such reasonable exceptions are available and how to inquire further about them. The bill applies to personal insurance contracts or policies delivered, issued for delivery, continued, or renewed in this state on or after July 1, 2010.

 

S.S.B. 3020
This bill requires an insurer to provide reasonable exceptions to the insurer's rates, rating classifications, company or tier placement, or underwriting rules or guidelines upon the written request of an applicant for insurance or an insured whose credit information has been directly influenced by specified extraordinary life circumstances. An insurer may require such a consumer to provide reasonable written and independently verifiable documentation of the event and to demonstrate the direct and meaningful impact of the event on the consumer's credit information. An insurer is required to inform the consumer of the outcome of such a request within 30 days of receiving documentation of an extraordinary event, in writing or in the same medium as the request. Insurers are required to notify consumers that such reasonable exceptions are available and how to inquire further about them. The bill applies to personal insurance contracts or policies delivered, issued for delivery, continued, or renewed in this state on or after July 1, 2010.

Kansas

H.B. 2390
Passed House 3/11/10
Amends the Kansas Insurance Score Act and enacts a new law supplemental to the Act. Specifically, the bill enacts a new law to create an exception to the Kansas Insurance Score Act for extraordinary life circumstances. An insurance company that uses credit information would be required, upon written request from an applicant for insurance coverage or its insured, to provide “reasonable exceptions” to the insurer’s rates, rating classifications, company or tier placement, or underwriting rules or guidelines for a consumer who has experienced and whose credit information has been directly influenced by an extraordinary life circumstance. The bill also creates notification requirements for insurers. Insurers would be required to provided notice to consumers that reasonable exceptions are available and information about how the consumer may inquire further. Within 30 days of the insurer’s receipt of sufficient documentation of an extraordinary life circumstance, the insurer is required to inform the consumer of the outcome of his or her request. The insurer also is permitted to grant an exception in the event where a consumer has not made a request in writing for the exception or where a consumer asks for consideration of repeated circumstances or the insurer has previously considered this circumstance.

 

H.B. 2501
Signed by governor 4/15/10, Chapter 108
Provides that notwithstanding any other law, rule or regulation, an insurer that uses credit information shall, upon written request from an applicant for insurance coverage or an insured, provide reasonable exceptions to the insurer's rates, rating classifications, company or tier placement, or underwriting rules or guidelines for a consumer who has experienced and whose credit information has been directly influenced by an extraordinary life circumstance, as defined.

 

H.B. 2563
The bill supplements the Kansas Insurance Score Act by creating an exception to the Act for extraordinary life circumstances. The Kansas Insurance Score Act provides the guidelines by which insurance companies can use a consumer’s credit score to determine the individual consumer’s risk and thereby the rates charged to the consumer. The insurance consumer would be permitted to request the exception, though the insurer could grant the exception without an initial request from the consumer. The extraordinary life circumstances for which an exception would be granted include: (1) a declared state or federal catastrophic event; (2) a serious illness or injury to the consumer or the consumer’s immediate family; (3) the death of a spouse, child or parent of the insured; (4) divorce or involuntary interruption of alimony or support payments; (5) identity theft; (6) military deployment; (7) involuntary loss of employment for more than three months; and (8) any other events as determined by the insurer. The bill also requires insurers to provide notice to all consumers that these exceptions are available and instructions on how the consumer may inquire about the exceptions. In addition, HB 2563 removes the requirement that the credit report used for the insurance score be no older than three years. Finally, the requirement that a notice of adverse action be provided to the consumer when the consumer is not receiving the best rate is eliminated.

Kentucky
none
Louisiana

H.B. 512
Provides that the only credit factor that may be used in determining insurance premiums is that relating to the payment of insurance premiums.

 

H.C.R. 247
Passed House 6/14/10
Urges and requests the Department of Insurance to study the practice of credit scoring.

Maine
none
Maryland
Prohibits an insurer, with respect to private passenger motor vehicle insurance, from rating a risk based, in whole or in part, on the credit history of an applicant or insured in any manner; repeals provisions of law authorizing an insurer to use the credit history of an applicant or insured to rate a new policy of private passenger motor vehicle insurance subject to specified limitations and requirements.
Massachusetts

H.B. 1024
Bans the use of certain socio-economic factors for insurance underwriting and rating of motor vehicle liability insurance.

 

S.B. 487
Bans the use of certain socio-economic factors for insurance underwriting and rating of motor vehicle liability insurance.

Michigan

S.B. 1064
Creates the Make Insurance Affordable and Accessible (MIAA) task force. The MIAA task force shall examine ways to increase the affordability and availability of automobile insurance in all areas of the state. In making this examination, the MIAA task force shall examine and report on at least all of the following: (a) How automobile insurance is marketed in the state and the availability of all automobile insurance in all markets of the state. (b) How automobile insurance is priced in the state, including, but not limited to, all of the following: (i) Use of territorial rating. (ii) Use of credit scoring and other premium discounts. (iii) Use of driving records and other classification factors. (c) Automobile insurance loss ratios and profit margins. (d) Average cost of claims. (e) Cost of mandatory benefits. (f) Other methods to reduce automobile insurance premiums, including, but not limited to, group pooling and insurance reciprocal exchanges.

 

S.B. 1340
Creates the Fair and Affordable Insurance Act. Provides that the commissioner shall not adopt rules or approve rates that are based directly or indirectly on religion, race, color, income, national origin, sex, familial status, marital status, credit history, prior insurance coverage, prior insurer, territory, or any rating factor that unfairly discriminates against any insured or applicant. Rates and rating factors shall not be considered unfairly discriminatory due to compliance with this chapter, notwithstanding any contrary provision of law.

 

S.B. 1555
Regulates use of credit information and credit scoring in relation to personal lines insurance.

Minnesota

H.F. 2625
S.F. 2432
Prohibits insurance underwriting for motor vehicle or homeowner's insurance on the basis of credit information.

 

H.F. 2942
Indefinitely postponed 5/11/10
S.F. 2839
Signed by governor 5/25/10, Chapter 384
Makes a technical change to the provision regarding the use of credit information by insurers.

 

H.F. 3193
S.F. 2768
Regulates the use of credit scores and other credit information in insurance underwriting.

Mississippi

S.B. 2547
Died in committee 2/2/10
Prohibits insurers from using information regarding a consumer's creditworthiness, credit standing or credit capacity for the purpose of determining rates for insurance or eligibility for coverage.

Missouri

H.B. 1379

This bill changes the laws regarding the use of credit information when underwriting insurance contracts. In its main provisions, the bill: (1) Revises the definition of "adverse action" to have the same meaning as in the federal Fair Credit Reporting Act including cancellation, denial, and nonrenewal of personal insurance coverage and creating any reduction, adverse, or unfavorable change in the terms of coverage, including charging higher premiums due to a person's credit history or insurance credit score; (2) Revises the definition of "contract" as it relates to automobile insurance, professional liability, and malpractice liability policies; and (3) Prohibits insurers from taking an adverse action against an applicant or insured based on the absence of credit information or an inability to calculate an insurance score in underwriting or rating personal insurance. The provisions of the bill apply to contracts entered into or renewed on or after July 1, 2011.

 

H.B. 1474

This bill changes the laws regarding the use of credit information when underwriting insurance contracts. In its main provisions, the bill: (1) Revises the definition of "adverse action" to have the same meaning as in the federal Fair Credit Reporting Act including the cancellation, denial, or nonrenewal of personal insurance coverage and creating an unfavorable change in the terms of coverage, including charging higher premiums; (2) Revises the definition of "contract" as it relates to automobile and property insurance policies to include motorcycle, manufactured homes, and personal inland marine coverage; mechanical breakdown coverage for autos and home appliances; noncommercial dwelling fire insurance; and boat, personal watercraft, snow mobile, and recreational vehicle policies; (3) Prohibits insurers from using an insurance credit score derived from using a person's income, gender, address, ethnic group, religion, marital status, education level, or nationality. No insurer may use loss information in calculating its insurance credit score if it also uses loss information separately to calculate its rates. The absence of credit information or an inability to calculate a score cannot be considered when underwriting insurance; (4) Prohibits insurers from using credit information to underwrite a policy after it has been in force for more than 36 months, unless there is a substantial change in the risk based on other factors excluding credit information; (5) Allows the consumer, at his or her annual renewal, to request the insurer re-underwrite the policy based on a current credit report or insurance score; (6) Prohibits insurers and credit reporting agencies from using as a negative factor in underwriting: (a) Credit inquiries not initiated by the insured; (b) Medical collection accounts and inquiries relating to insurance coverage; (c) Multiple lender inquiries; (d) Absence of credit history or the inability to determine the history; (e) Use of a particular credit, charge, or debit cards; or (f) Consumer's total available line of credit; and (7) Requires insurers to file their insurance credit scoring models or other scoring processes with the Department of Insurance, Financial Institutions and Professional Registration.

 

S.B. 1031
This act modifies several provisions of law relating to homeowner's and property insurance.

Montana
No Regular 2010 Session
Nebraska
none
Nevada
No Regular 2010 Session
New Hampshire

H.B. 1236
Signed by governor 6/9/10, Chapter 125
Declares that an insurer shall not base underwriting a policy of automobile or casualty insurance solely on a credit rating, a credit history, or a credit scoring model.

 

S.B. 340
Failed to pass Senate 3/24/10
Makes it a discriminatory and unfair insurance trade practice to charge higher premiums for automobile and homeowner insurance based on credit rating. Current law allows the use of credit reports for such purposes if it is not the sole reason for higher premiums.

New Jersey

S.B. 176
This bill temporarily prohibits the use of insurance scoring by property-casualty insurers in rate-making for personal lines insurance coverage. Thus, an insurer, for the designated period, shall not use a credit score or other credit information in determining a person’s eligibility for insurance coverage or the premium paid by the person in consideration for coverage received. The provisions of the bill shall apply to contracts or policies delivered, issued, executed, or renewed, or approved for issuance or renewal by the commissioner of Banking and Insurance, on or after the first day of the third month next following the bill’s effective date and until June 30, 2011.

 

S.B. 1816
This bill requires the Department of Banking and Insurance to conduct an investigation of practices of the automobile insurance industry in regard to increases in automobile insurance 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 and addresses 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 Mexico

S.B. 72
Prohibits insurers of motor vehicles from using a credit report or other credit information as a basis to underwrite, rate or renew personal motor vehicle insurance coverage or eligibility; repeals a section of the New Mexico insurance code.

New York
A.B. 1537
Enacting clause stricken 4/13/10
S.B. 6669
Enacting clause stricken 4/7/10
Prohibits service providers, including insurance companies, from solely relying upon credit reports for the purpose of determining whether to provide or continue to provide service to any consumer or potential consumer; further prohibits the sole reliance upon credit reports by service providers for the purpose of requiring the payment of a deposit, additional fee or higher rate for service.
 
A.B. 1538
Enacting clause stricken 4/13/10
S.B. 6659
Enacting clause stricken 4/7/10
Directs the superintendent of Insurance to promulgate rules and regulations limiting the use of credit scores to determine automobile insurance premiums.
 

A.B. 5181
S.B. 7233
Requires commercial lines insurers to provide notice to consumers when credit information is used in the rating or underwriting of such insurance.

 

A.B. 10327
S.B. 7390
Directs the superintendent of insurance to promulgate rules and regulations limiting the use of credit scores to determine automobile insurance premiums.

 

S.B. 2573
S.B. 7297
Directs the superintendent of Insurance to promulgate rules and regulations limiting the use of credit scores to determine automobile insurance premiums.

 

S.B. 6631
S.B. 7373
Prohibits service providers, including insurance companies, from solely relying upon credit reports for the purpose of determining whether to provide or continue to provide service to any consumer or potential consumer; further prohibits the sole reliance upon credit reports by service providers for the purpose of requiring the payment of a deposit, additional fee or higher rate for service.

 

S.B. 6639
S.B. 7274
Directs the superintendent of Insurance to promulgate rules and regulations limiting the use of credit scores to determine automobile insurance premiums.

North Carolina
none
North Dakota
No Regular 2010 Session
Ohio

S.B. 163
Amends §3901.21 of the Revised Code to prohibit an insurer's use of a credit score, credit history, or credit report in fixing a premium rate for, or the terms and conditions of, an insurance policy, or in determining whether to issue, continue, or renew an insurance policy.

Oklahoma

S.B. 2054
Signed by governor 5/6/10, Chapter 222
Relates to insurance; authorizes the Insurance commissioner to require certain documents to be filed electronically; authorizes the commissioner to promulgate certain rules; relates to retaliatory actions; makes technical amendments to the provision regarding the use of credit information in insurance.

Oregon
No Regular 2010 Session
Pennsylvania
none
Puerto Rico
none
Rhode Island

H.B. 7874
Withdrawn from further consideration 3/30/10
Removes the law which allows homeowners and automobile insurance carriers from utilizing a customer's credit rating in fixing premium rates.

 

H.B. 7916
This act prevents the consideration of an applicant’s credit history in determining automobile insurance rates.

South Carolina

S.B. 997
Amends Chapter 57, Title 38 of the 1976 code, relating to trade practices in the insurance industry, by adding §38-57-125 to provide that a person's credit history or credit report cannot be a factor considered when determining whether to issue a policy or contract or when setting premiums, policy fees, or other charges for an insurance policy or contract.

South Dakota
none
Tennessee

H.B. 2508
Withdrawn 1/28/10
S.B. 2794
Withdrawn 2/1/10
Prohibits insurance companies underwriting personal insurance from taking an adverse action against an existing consumer solely because the consumer's credit information has changed.

Texas
No Regular 2010 Session
Utah
none
Vermont
none
Virginia
Prohibits insurers from setting rates for motor vehicle insurance on the basis of a person's credit history or credit score. The measure will become effective January 1, 2011.
 
Withdrawn 2/15/10
Prohibits insurers from setting rates for motor vehicle insurance on the basis of a person's credit history or credit score.
Washington
Prohibits an insurer from considering a consumer's credit history education, or income in determining personal insurance rates, premiums, or eligibility for coverage.
West Virginia

H.B. 2092
Prohibits the number of inquiries reflected in a credit report, credit score report or CLUE report from adversely affecting an application for insurance; limits the use of a credit score to banking institution credit scoring for casualty insurance rate filings; and prohibits reliance on information which is false or potentially false; limits the use of a credit score in casualty insurance rate filings.

 

H.B. 2240
Prohibits the use of a person's credit history in insurance transactions.

 

H.B. 2282
Prohibits the use of a credit score in casualty insurance rate filings.

 

H.B. 2777
Prohibits the use of a person's credit history in insurance transactions.

Wisconsin

A.B. 185
Failed to pass pursuant to Senate Joint Resolution 1 4/28/10
Prohibits an insurer from considering information in an individual’s credit report for purposes of issuing or renewing motor vehicle or property insurance, including renters and homeowner’s insurance, or setting premiums for motor vehicle or property insurance. The bill also prohibits a rating plan for motor vehicle or property insurance from using information in an individual’s credit report as a rating factor.

Wyoming

none

 

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