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Use of Credit Information in Insurance 2011 Legisl

Use of Credit Information in Insurance 2011 Legislation

Last Updated: December 20, 2011

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.

Legislators in 26 states have introduced legislation regarding the use of credit information in insurance in the 2011 legislative session. Four states—Louisiana, Massachusetts, Montana and Nevada—enacted legislation or passed resolutions in 2011. 

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STATE
BILL SUMMARY
Alabama
none
Alaska
none
Arizona
none
Arkansas
none
California
none
Colorado

H.B. 1124
Postponed Indefinitely 2/17/11
The bill specifies the purposes for which consumer credit information (i.e., consumer credit reports and credit scores) can be used in certain situations. Amends the current law regarding the permissible use of credit information by an insurer offering personal lines of property and casualty insurance (insurer) as follows: Makes the filing of actuarial justification mandatory for insurers that use insurance scores to underwrite and rate risk; and clarifies that "adverse action", with regard to insurance, includes denying a consumer a discount or placing a consumer in a higher tier. Removes a separate statutory section pertaining to the use of credit information in automobile underwriting or rating, and instead requires automobile insurers to comply with the same provisions governing use of credit information as property and casualty insurers.

Connecticut
none
Delaware
none
District of Columbia
none
Florida

S.B. 938
Died in committee 5/7/11
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 insurers from using credit reports and credit scores in making rating determinations. Deletes provisions limiting and regulating the use of credit scores by insurers when making rating determinations.

Georgia
none
Guam
not available
Hawaii
none
Idaho
none
Illinois
none
Indiana
none
Iowa

H.F. 219
This bill prohibits the use of credit information to underwrite or rate risks for private passenger automobile insurance that is personal insurance and not commercial insurance and that is individually underwritten for personal, family, farm, or household use. For the purposes of the bill, “credit information” means any information related to credit that is contained in or derived from a credit report, or provided in an application for personal insurance. Information that is not related to credit is not considered “credit information” regardless of whether the information is contained in or derived from a credit report or an application for credit or is used to calculate an insurance score. The bill provides that credit information cannot be used to underwrite or rate risks for private passenger automobile insurance, including but not limited to using an insurance score; denying issuance, canceling, or refusing to renew such insurance based on credit information; basing renewal rates on credit information; taking adverse action against a consumer based on the fact that the consumer has no credit card account; considering an absence of credit information; taking adverse action against a consumer based on credit information; and using certain information contained in a credit report as a negative factor in any methodology for underwriting or rating risks. A violation of the provisions of the bill is an unfair or deceptive act or practice in the business of insurance as provided in Code chapter 507B and the proceedings, orders, and penalties contained in Code chapter 507B are applicable to violations of the provisions of the bill.

Kansas
none
Kentucky
none
Louisiana

H.C.R. 46
Adopted 5/24/11
Urges and requests the Department of Insurance to study the practice of credit scoring.

Maine

L.D. 368
This bill requires an insurer that obtains credit information on a consumer to provide the consumer with notice of the consumer's credit score and identify the impact of that score on rates and coverage as part of the policy issued to the consumer.

Maryland

H.B. 1083
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. 309
Relates to the use of credit based insurance scoring for underwriting and rating of insurance.

H.B. 1186
Relates to the use of credit information of applicants or insured persons in the establishment of insurance rates.

H.B. 3795
Signed by governor 11/22/11, Chapter 195
Prohibits the use of credit in underwriting and rating private passenger motor vehicle insurance.

S.B. 461
See H.B. 3795 11/7/11
Regulates insurance underwriting and motor vehicle liability ratings.

Michigan

H.B. 4593
Passed House 10/13/11
An insurance company would be required to indemnify, defend, and hold harmless producers from and against all liability, fees, and costs arising out of or relating to the actions, errors, or omissions of a producer resulting from the use of credit information or insurance scores for the insurer, as long as the producer followed the procedures and instructions established by the insurer and complied with all applicable laws and regulations.

H.B. 4594
Passed House 10/13/11
Prohibits an insurance company from using credit information or an insurance score as any part of a decision to deny, cancel, or nonrenew a personal insurance policy under Chapters 21, (auto and home insurance), 24 (casualty insurance) or 26 (fire and inland marine insurance). However, credit information and an insurance score could be used to determine premium installment payment options and availability.

H.B. 4595
Passed House 10/13/11
Requires an insurance company to provide reasonable exceptions to the application of credit information on the customer's rates, rating classifications, or company or tier placement if that customer's credit information has been directly influenced by any of the following events: (1) a catastrophic event, as declared by the federal or state government; (2) serious illness or injury, or serious illness or injury to an immediate family member; (3) death of a spouse, child, or parent; (4) divorce or involuntary interruption of legally owned alimony or support payments; (5) identity theft; (6) temporary loss of employment for a period of three months or more, if it results from involuntary termination; (7) military deployment overseas; (8) other events, as determined by the insurance company. If a customer submitted a request for an exception, the insurer could, but is not required to, do any of the following: (1) require a reasonable written and independently verifiable documentation of the event; (2) require the customer to demonstrate that the event had a direct and meaningful impact on his or her credit information; (3) require a request to be made no more than 60 days from the date of application for insurance or the policy renewal; (4) grant an exception even if the customer did not provide an initial request in writing; (5) grant an exception where the customer asks for consideration of repeated events or the company has considered the event previously. Granting such an exception would not be considered a violation of a law, rule, or regulation relating to underwriting, rating, or rate filing. A company would have to notify customers that reasonable exceptions are available.

H.B. 4596
Passed House 10/13/11
Provides that if it is determined through a dispute resolution process that the credit information of a current insured is incorrect or incomplete and if the insurer received notice of the determination from either the consumer reporting agency or the insured, then the insurer must reevaluate the customer within 30 days of receiving the notice. After reevaluating the insured, the company must make any adjustments necessary, consistent with the bill's provisions and the insurer's underwriting, rating guidelines, and premium discount plan. If the insurer determines that the insured had overpaid premiums, the insurer must 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.

S.B. 300
Regulates use of credit information and credit scoring; regulates adverse actions.

Minnesota
none
Mississippi

S.B. 2674
Died in committee 2/1/11
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. 920
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 or 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 any insurance policy issued in this state other than a policy of mortgage insurance or commercial insurance; (3) Prohibits an insurer from taking an adverse action against a new applicant based on an inability to calculate an insurance score in underwriting or rating personal insurance without consideration of another noncredit-related underwriting factor or based on information that is the subject of a written dispute between the applicant and a consumer reporting agency; and (4) Prohibits an insurer from using a credit report or insurance credit score as a factor in underwriting or taking any adverse action based on a credit report or insurance credit score against a person currently insured under an existing insurance contract with the insurer. The provisions of the bill apply to contracts entered into or renewed on or after January 1, 2012.

Montana

H.B. 29
Signed by governor 5/5/11, Chapter 314
Includes military deployment overseas as an extraordinary event to be considered for underwriting or rating exceptions in regard to credit reports.

H.B. 125
Signed by governor 4/20/11, Chapter 227
Amends provisions regarding the use of credit information in insurance.

S.B. 137
Missed Deadline for General Bill Transmittal 2/24/11
Prohibits an insurer writing automobile insurance from refusing to insure or refusing to continue to insure an individual or from varying rates or limiting the scope or amount of coverage or benefits available to an individual based in any part on the insurer's knowledge of the individual's credit history.

Nebraska
none
Nevada

A.B. 74
Signed by governor 6/17/11, Chapter 506
Requires an insurer that uses credit information to provide reasonable exceptions to their rates in certain circumstances.

A.B. 162
Prohibits an insurer from using the consumer credit information of a person for certain purposes relating to insurance policies; repeals provisions authorizing an insurer to use consumer credit information as a basis for making certain determinations and taking certain actions regarding insurance policies; provides administrative penalties.

New Hampshire

H.B. 359
Failed to pass House 3/15/11
This bill makes it a discriminatory and unfair insurance trade practice to charge higher premiums for automobile and homeowners 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. This bill also prohibits insurers from requesting certain information to underwrite casualty insurance coverage.

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
none
New York

A.B. 3660
S.B. 3931
Prohibits automobile insurers from considering an applicant's or insured's credit history, credit rating or lack of a credit history as a factor in the underwriting, rating, premiums, or the decision of issuance or renewal of any automobile insurance policy to such applicant or insured.

A.B. 4677
S.B. 694
Requires commercial lines insurers to provide notice to consumers when credit information is used in the rating or underwriting of such insurance.

A.B. 5273
Directs the superintendent of insurance to promulgate rules and regulations limiting the use of credit scores to determine automobile insurance premiums.

A.B. 5595
Enacting clause stricken 12/16/11
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.

H.B. 7553
Requires insurers to display certain underwriting information on the declarations page to their homeowners and dwelling fire personal lines policies.

A.B. 7720
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.

S.B. 1128
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
none
Ohio

H.B. 70
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.

S.B. 34
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

H.B. 1039
Relates to the Use of Credit Information in Personal Insurance Act; modifies definition.

H.B. 1215
Amends the Use of Credit Information in Personal Insurance Act; makes a technical change to a provision stating the title of the Act.

H.B. 1263
Prohibits the use of credit information in personal insurance; repeals the Use of Credit Information in Personal Insurance Act.

H.B. 2047
Relates to the Use of Credit Information in Personal Insurance Act; requires certain information be provided by consumer.

H.B. 2077
Relates to the Use of Credit Information in Personal Insurance Act; clarifies language.

Oregon

S.B. 486
Requires an insurer using credit information in the issuance of personal insurance policies to rerate any personal insurance policy held by a consumer with the insurer if requested by the consumer even if credit information was not used by the insurer in the initial rating of policy.

Pennsylvania

H.B. 1230
Provides for use of credit history of an insured.

H.B. 1285
Relates to the use of credit information by carriers of personal lines insurance.

S.B. 126
Provides for use of credit history of insureds; and further provides for penalties imposed by Insurance Department.

Puerto Rico
none
Rhode Island

H.B. 5077
This act prevents the consideration of an applicant’s credit history in determining automobile insurance rates.

S.B. 89
This act provides that insurers shall not use credit ratings to underwrite or rate risks.

S.B. 317
This act prevents the consideration of an applicant’s credit history in determining automobile insurance rates.

South Carolina

H.B. 3101
Adds §38-55-35 so as to provide an insurer may not use the credit report of a person seeking a contract of insurance to determine the insurance rate of the contract or whether to issue the insurance contract, and to define certain terms; adds §41-1-120 so as to provide an employer may not use a credit report to evaluate a person for employment, and to define certain terms; adds §56-31-35 so as to provide a vehicle rental company may not use the credit report of a person seeking to rent certain vehicles to determine the rental rate of the vehicles or whether to rent the vehicles, and to define certain terms; and amends §37-20-110, relating to the definition of a "credit report", so as to remove establishing a person's eligibility for employment from the purposes for which this report is intended.

H.B. 3778
Adds §38-73-750 so as to require automobile insurers to notify insureds when premiums are increased resulting from changes in a credit report of the insured and require the insurer to send a copy of the credit report when notifying the insured.

S.B. 85
Adds §38-55-35 so as to provide an insurer may not use the credit report of a person seeking a contract of insurance to determine the insurance rate of the contract or whether to issue the insurance contract, and to define certain terms; adds §41-1-120 so as to provide an employer may not use a credit report to evaluate a person for employment, and to define certain terms; adds §56-31-35 so as to provide a vehicle rental company may not use the credit report of a person seeking to rent certain vehicles to determine the rental rate of the vehicles or whether to rent the vehicles, and to define certain terms; and amends §37-20-110, relating to the definition of a "credit report", so as to remove establishing a person's eligibility for employment from the purposes for which this report is intended.

South Dakota
none
Tennessee

H.B. 1942
S.B. 2046
Prohibits an insurer from taking an adverse action against a consumer based primarily on the consumer's insurance score, credit reports, or other credit information or based primarily on the fact the consumer does not have a credit account.

Texas

H.B. 194
Prohibits the use of credit scoring in certain lines of personal insurance.

H.B. 376
Relates to use of a credit score by a business or lender.

H.B. 430
Provides that if an insurer uses a credit score or credit information in the underwriting or rating of a policy issued to an insured, the insurer shall permit the insured to elect annually to require the insurer to provide to consumer reporting agencies the insured’s payment history information.

H.B. 2297
Relates to the requirement that certain insurers provide consumers with information related to improving their credit scores.

S.B. 739
Relates to prohibition of the use of credit scoring in underwriting and rating certain personal lines of insurance coverage.

Utah
none
Vermont
none
Virginia

S.B. 1430
Passed By Indefinitely 1/24/11
Prohibits insurers from setting rates for motor vehicle insurance on the basis of a person's credit history or credit score.

Washington

H.B. 1318
Addresses the use of credit history, education, and income for personal insurance policies.

S.B. 5120
Modifies insurance provisions relating to: (1) Public inspection of certain actuarial formulas, statistics, and assumptions; (2) Credit history and insurance scores; and (3) Certain items required to be filed with the insurance commissioner by insurers or rating organizations or by title insurers. Eliminates the insurance commissioner's authority to review and disapprove certain rates for individual products.

West Virginia

H.B. 2049
Prohibits the use of a person's credit history in insurance transactions.

H.B. 2319
Prohibits the use of a credit score in casualty insurance rate filings.

H.B. 2467
Amends and reenacts §33-20-3 and §33- 20-5, all relating to prohibiting 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.

Wisconsin

A.B. 98
This bill prohibits an insurer from considering information in an individual’s credit report when issuing or renewing motor vehicle insurance or renter’s or homeowner’s (property) insurance, or when setting premiums for motor vehicle or property insurance. The bill also prohibits an insurer from considering an individual’s zip code when issuing or renewing, or when setting premiums for, motor vehicle insurance. In addition, the bill prohibits a rating plan for motor vehicle insurance from using information in an individual’s credit report or an individual’s zip code as a rating factor, and prohibits a rating plan for property insurance from using information in an individual’s credit report as a rating factor.

Wyoming
none

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