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Use of Credit Information in Insurance 2013 Legis

Use of Credit Information in Insurance 2013 Legislation

Insurance FormUpdated Feb. 28, 2014

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 24 states and Puerto Rico addressed legislation regarding the use of credit information in insurance in the 2013 legislative session. Nevada enacted a bill requiring the Division of Insurance of the Department of Business and Industry to post on its Internet website a list of each authorized insurer that does not use an insurance score when underwriting, rating an applicant for or calculating the premium for a policy of insurance for a passenger car or homeowner’s insurance; and authorizing the Division to post certain information relating to the use of insurance scores on its Internet website.
 

AL | AK | AZCTIN | KY | MEMI | MN | MS | MO | NE | NV | NJNYOH | PAPR | RI | SCTN | TX | VA | WA | WV
STATES BILL SUMMARY
Alabama H.B. 161
This bill provides that personal property insurers that utilize the credit history of the insured in determining the policy premium of the insurer, credit rating factors, or rating tiers that are partially or completely based on the credit history utilized in the premium calculation shall be filed separately for the perils of wind or hail coverage and the perils of non-wind or hail coverage, and those rating factors shall properly reflect the predictability of future losses for those two coverages from the credit history of the insured.
Alaska S.B. 55
Relates to actions by insurers based on credit history or insurance score.
Arizona S.B. 1395
Provides that notwithstanding any other law, an insurer shall not use credit ratings, credit reports, credit scoring models or credit information to underwrite, classify or rate insurance policies in this state. An insurer shall 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. 5510
Failed Joint Favorable deadline 3/21/13
Prohibits the use of an applicant's credit history as a factor in underwriting or rating a private passenger motor vehicle insurance policy.
S.B. 863
This bill bars insurers from using an applicant's or insured's marital status, age, gender, or education level as a factor in underwriting or rating private passenger non-fleet automobile insurance.
Delaware none
District of Columbia none
Florida none
Georgia none
Guam not available
Hawaii none
Idaho none
Illinois none
Indiana H.B. 1073
Prohibits consideration of credit information in any manner in connection with the renewal of a personal insurance policy. Allows an insurer to maintain in the current tier an insured who is eligible to be placed in a less favorably priced tier after re-underwriting and re-rating based on current credit information. Removes a disclosure exemption.
H.B. 1231
Extends antidiscrimination and civil rights statutes to include prohibiting discrimination based on disability, prohibits insurers from using disability in calculating an insurance score.
Iowa none
Kansas none
Kentucky H.B. 136
Amends KRS 304.20-042 to restrict an insurer's use of credit information for property and casualty insurance contracts for underwriting or to rate risks by prohibiting the sole use of lack of credit history or lack of a credit card account without consideration of any other applicable factor independent of credit information; requires an insurer to treat a consumer who has no credit history or no credit card account as if the applicant or insured had neutral credit information.
Louisiana none
Maine L.D. 70
This bill requires an insurer that obtains credit information on a consumer to provide the consumer with notice of the consumer's credit rating and identify the impact of that rating on rates and coverage as part of the policy issued to the consumer.
Maryland none
Massachusetts none
Michigan H.B. 4511
Prohibits the use of a credit score to determine insurance premium.

H.B. 4888

Prohibits the use of certain credit scores to determine premiums.

H.B. 5000

Prohibit no-fault insurance rates based on credit history, education, occupation, or residency.

Minnesota H.F. 47
S.F. 1387
Prohibits the use of consumer credit scores or history by insurers in underwriting automobile insurance policies.
Mississippi S.B. 2478
Died in committee 2/5/13
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. 260
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, 2014.
Montana none
Nebraska L.B. 92
Prohibits use of credit information for insurance; repeals a model act.
Nevada

A.B. 120

Signed by governor 5/24/13, Chapter 123

Subject to certain limitations, an insurer is allowed to use an insurance score, defined as a number or rating that is derived from an algorithm, computer application, model or other process that is based in whole or in part on credit information, when determining an insurance premium. If an insurer uses credit information in underwriting or rating an applicant, the insurer is required to provide written disclosure that the insurer may obtain credit information in connection with an application. If an insurer takes adverse action based on credit information, the insurer is required to provide to the applicant or policyholder a detailed explanation of the reasons for the adverse action. This bill: (1) requires the Division of Insurance of the Department of Business and Industry to post on its Internet website a list of each authorized insurer that does not use an insurance score when underwriting, rating an applicant for or calculating the premium for a policy of insurance for a passenger car or homeowner’s insurance; and (2) authorizes the Division to post certain information relating to the use of insurance scores on its Internet website.

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
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. 3880
Directs the superintendent of Financial Services to promulgate rules and regulations limiting the use of credit scores to determine automobile insurance premiums.
A.B. 5126
Prohibits insurers from using credit information as the sole basis for charging an increased premium when underwriting or rating a new policy.
A.B. 5746
Requires insurers to display certain underwriting information on the declarations page to their homeowners and dwelling fire personal lines policies.
S.B. 2975
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.
S.B. 3207
Directs the superintendent of Financial Services to promulgate rules and regulations limiting the use of credit scores to determine automobile insurance premiums.
North Carolina none
North Dakota none
N. Mariana Islands not available
Ohio S.B. 73
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 none
Oregon none
Pennsylvania

H.B. 1887

Amends the Insurance Department Act of 1921, provides for the use of the credit history of an insured; provides that an insurer shall not deny, cancel or refuse to renew or raise the premium of personal insurance due in whole or in part to an insured's credit history; provides for revoked certificate of qualifications of an insurance producer and civil penalties; includes property and casualty insurance, homeowner and private passenger automobile insurance

Puerto Rico S.B. 41
Amends Law 77 of 1957 to prohibit the use of credit information for granting an insurance policy. Provides for insurers and insurance agents to deliver a detailed quote of the policy that is being offered to prospective insured at the time of the offer.
Rhode Island H.B. 5028
This act prevents the consideration of an applicant’s credit history in determining automobile insurance rates.
S.B. 439
This act prohibits insurers from using credit ratings to underwrite or rate risks.
South Carolina

H.B. 4181

Adds §38-73-25 so as to provide a property casualty insurance rate-making organization may not use a credit score or credit report to determine the rate for a homeowner's insurance policy; and adds §38-75-1235 so as to provide an insurer may not refuse to issue, refuse to renew, or cancel a homeowner's insurance policy based on a credit score or credit report.

South Dakota none
Tennessee H.B. 1175
S.B. 931
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. 1007
Relates to prohibiting the use of credit scoring in certain lines of personal insurance.
S.B. 72
Relates to a prohibition of the use of credit scoring in underwriting and rating certain personal lines of insurance coverage.
Utah none
Vermont none
Virginia H.B. 1740
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 H.B. 1212
Prohibits an insurer from using a consumer's credit history to determine personal insurance rates or premiums, or to deny, cancel, or non-renew coverage for homeowners insurance, dwelling property coverage, or earthquake coverage for a residence.
West Virginia H.B. 2078
Prohibits the use of a credit score in casualty insurance rate filings.
H.B. 2282
Prohibits the use of a person's credit history for insurance purposes.
H.B. 2532
Prohibits the use of a person's credit history in employment hires except in limited circumstances where there is a legitimate job related purpose in requesting the credit history; and prohibits the use of a person's credit history in certain insurance transactions.
H.B. 3010
Relates to the use of credit information in connection with the declination and termination of property insurance and expanding the information required to be provided by an insurer in the notice of declination or termination to an insured or applicant.
Wisconsin none
Wyoming none
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