Use of Credit Information in Insurance 2012 Legislation

Insurance FormUpdated Nov. 21, 2012

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 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.

Lawmakers in 16 states addressed legislation regarding the use of credit information in insurance in the 2012 legislative session. Two states enacted legislation in 2012. Kentucky allowed exceptions to an insurer’s use of credit information with regard to rates, rating classifications, tier placement and underwriting guidelines for specific life events. Michigan enacted five bills that prohibited an insurer from using credit information or an insurance score as part of a decision to deny, cancel or not renew a personal insurance policy. The legislation allowed an insurer to use credit information or a credit-based insurance score to determine premium installment payment options and availability. The legislation provided that an insurer may not apply credit information or a credit-based insurance score that the Michigan Code otherwise permits unless certain criteria are met. Finally, the legislation requires an insurer to notify an insured or applicant against whom the insurer takes an adverse action based on credit information, and provide the reasons for the action.
 

AZIL | KYMD | MA | MI | MN | MS | MO | NJNYOK | RI | VAWV | WI
STATES
BILL SUMMARY
Alabama
none
Alaska
none
Arizona
H.B. 2017
Provides that addresses and zip codes shall not be used in calculating insurance scores.
Arkansas
none
California
none
Colorado
none
Connecticut
none
Delaware
none
District of Columbia
none
Florida
none
Georgia
none
Guam
not available
Hawaii
none
Idaho
none
Illinois
H.B. 5839
Amends the Use of Credit Information in Personal Insurance Act to provide that an insurer authorized to do business in the state that uses credit information to underwrite or rate risks must recalculate the insured's insurance score at the request of the insured, and not more than once annually, to determine whether the insured is eligible for a reduction in his or her premium rate.
Indiana
none
Iowa
none
Kansas
none
Kentucky
H.B. 497
Signed by governor 4/11/12, Chapter 116
Creates a new statute in Subtitle 13 of KRS Chapter 304 to allow exceptions to an insurer’s use of credit information with regard to rates, rating classifications, tier placement and underwriting guidelines for specific life events.
S.B. 31
Creates a new section of Subtitle 12 of KRS Chapter 304 to prohibit the use of an insured's or applicant's credit history for actuarial purposes for all insurance policies, contracts, or plans; amends KRS 304.20-040 to conform; repeals KRS 304.20-042.
S.B. 121
Creates a new section of Subtitle 13 of KRS Chapter 304 to allow exceptions to an insurer’s use of credit information with regard to rates, rating classifications, tier placement and underwriting guidelines for specific life events.
Louisiana
none
Maine
none
Maryland
S.B. 785
Withdrawn 3/15/12
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.
Michigan
H.B. 4593
Signed by governor 6/26/12, Public Act 205
Requires an insurer to indemnify a producer against liability related to the producer's use of credit information or insurance scores for the insurer. Provides that nothing in Chapter 21A may be construed to provide an insured or applicant for insurance with a cause of action that does not exist in the absence of the chapter.
H.B. 4594
Signed by governor 6/26/12, Act 206
Prohibits an insurer from using credit information or an insurance score as part of a decision to deny, cancel, or not renew a personal insurance policy. Allows an insurer to use credit information or a credit-based insurance score to determine premium installment payment options and availability. Provides that an insurer may not apply credit information or a credit-based insurance score that the Code otherwise permits unless certain criteria are met. Requires an insurer to notify an insured or applicant against whom the insurer takes an adverse action based on credit information, and provide the reasons for the action.
H.B. 4595
Signed by governor 6/26/12, Act 207
Requires an insurer to provide reasonable exceptions to the use of credit information upon the request of an insured or applicant, under specific circumstances.
H.B. 4596
Signed by governor 6/26/12, Act 208
Requires an insurer to reevaluate an insured if a dispute resolution process determines that the initial evaluation was based on incorrect or incomplete credit information, and make any necessary adjustments.
H.B. 5244
Prohibit use of credit scores, occupation and level of education for rating of auto insurance.
S.B. 300
Signed by governor 6/14/12, Act 165
Defines terms used throughout Chapter 21A (Credit Information and Credit Scores) that regulates the use of credit information and insurance scores with regard to personal insurance policies (such as automobile and home insurance).
S.B. 994
Prohibits using credit score to determine insurance premium.
Minnesota
H.F. 2279
Relates to insurance. Modifies the limitations on the use of credit information.
Mississippi
S.B. 2585
Died in committee 3/6/12
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. 1406
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 Jan. 1, 2013.
Montana
none
Nebraska
none
Nevada
none
New Hampshire
none
New Jersey
S.B. 1107
Prohibits use of insurance scoring by property-casualty insurers in rate-making for personal lines insurance coverage.
S.B. 1300
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
Enacting clause stricken 9/4/12
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.
North Carolina
none
North Dakota
none
N. Mariana Islands not available
Ohio
none
Oklahoma
H.B. 2297
Relates to insurance. Prohibits the use of credit information in personal insurance; repeals 36 O.S. 2011, §§950, 951, 952, 953, 954, 955, 956, 957, 958 and 959, which relate to the Use of Credit Information in Personal Insurance Act.
Oregon
none
Pennsylvania
none
Puerto Rico
none
Rhode Island
H.B. 7411
This act prevents the consideration of an applicant’s credit history in determining automobile insurance rates.
S.B. 2074
This act provides that insurers shall not use credit ratings to underwrite or rate risks.
S.B. 2296
This act prevents the consideration of an applicant’s credit history in determining automobile insurance rates.
South Carolina
none
South Dakota
none
Tennessee
none
Texas
none
Utah
none
Vermont
none
Virginia
H.B. 355
Prohibits insurers from non-renewing, cancelling, increasing any charge, or taking other adverse action regarding motor vehicle insurance on the basis of a person's credit history or credit score if the person has a perfect driving record, which is defined as not having a motor vehicle operator's license suspended or revoked, not being convicted of a moving traffic violation, not having a motor vehicle accident or filing a claim in which the person was at fault, within the preceding three years. The measure also authorizes an insured to have their insurer reevaluate the insured based on corrected driving record information. Finally, the measure directs the Bureau of Insurance of the State Corporation Commission to compile and review all reputable studies that address the extent to which (1) automobile insurance credit scoring models based on credit information, credit scores, or similar financial information are effective predictors of risk and (2) any such additional risk is appropriately reflected in rates for such insurance and to recommend changes to ensure that the use of automobile insurance credit scoring models does not result in rates that are higher than is required to account for additional risk.
H.B. 432
Stricken from docket 2/7/12
Prohibits insurers from setting rates for motor vehicle insurance on the basis of a person's credit history or credit score.
S.B. 350
Prohibits insurers from setting rates for motor vehicle insurance on the basis of a person's credit history or credit score.
Virgin Islands not available
Washington
none
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. Prohibits reliance on information that is false or potentially false. Limits the use of a credit score in casualty insurance rate filings.
Wisconsin
A.B. 98
Failed to pass pursuant to Senate Joint Resolution 1 3/23/12
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
Powered by State Net