Flsenate Archive: Session

HB 0101A

2003

A bill to be entitled

An act relating to the use of credit reports and credit

scores by insurers; creating s. 626.9741, F.S.; specifying

that the act's purpose is to regulate and limit the use of

credit reports and credit scores by insurers for

underwriting and rating purposes; specifying the types of

insurance to which the act applies; defining terms;

requiring that an insurer identify the items in a credit

report which resulted in an adverse decision; prohibiting

an insurer from making an adverse decision based solely on

a credit report or score or certain other factors;

requiring an insurer to provide a means for appeal to an

applicant or insured under certain circumstances;

prohibiting the use of a credit report or score unless the

Office of Insurance Regulation determines, based on a

filing by the insurer, that such use is valid and

reasonable; authorizing the Office of Insurance Regulation

to disapprove such filings; requiring an insurer to adhere

to certain laws and rules; requiring an insurer to provide

for an adjustment in the premium of an insured to reflect

an improvement in credit history; authorizing the

Financial Services Commission to adopt rules; providing

for application; providing for construction of the act in

pari materia with laws enacted during the 2003 Regular

Session of the Legislature; providing a contingent

effective date.

Be It Enacted by the Legislature of the State of Florida:

Section 1. Section 626.9741, Florida Statutes, is created

to read:

626.9741 Use of credit reports and credit scores by

insurers.--

(1) The purpose of this section is to regulate and limit

the use of credit reports and credit scores by insurers for

underwriting and rating purposes. This section applies only to

personal lines motor vehicle insurance and personal lines

residential insurance, which includes homeowners, mobile

homeowners dwelling, tenants, condominium unit owners,

cooperative unit owners, and similar types of insurance.

(2) As used in this section, the term:

(a) "Adverse decision" means a decision to refuse to issue

or renew a policy of insurance; to issue a policy with

exclusions or restrictions; to increase the rates or premium

charged for a policy of insurance; to place an insured or

applicant in a rating tier that does not have the lowest

available rates for which that insured or applicant is otherwise

eligible; or to place an applicant or insured with a company

operating under common management, control, or ownership which

does not offer the lowest rates available, within the affiliate

group of insurance companies, for which that insured or

applicant is otherwise eligible.

(b) "Credit report" means any written, oral, or other

communication of any information by a consumer reporting agency,

as defined in the federal Fair Credit Reporting Act, 15 U.S.C.

s. 1681, et seq., bearing on a consumer's credit worthiness,

credit standing, or credit capacity, which is used or expected

to be used or collected as a factor to establish a person's

eligibility for credit or insurance, or any other purpose

authorized pursuant to the applicable provision of such federal

act. A credit score alone, as calculated by a credit reporting

agency or by or for the insurer, may not be considered a credit

report.

derived by using any or all data from a credit report in any

type of model, method, or program, whether electronically, in an

algorithm, computer software or program, or any other process,

for the purpose of grading or ranking credit report data.

(d) "Tier" means a category within a single insurer into

which insureds with substantially similar risk, exposure, or

expense factors are placed for purposes of determining rate or

premium.

(3) An insurer must inform an applicant or insured, in the

same medium as the application is taken, that a credit report or

score is being requested for underwriting or rating purposes. An

insurer that makes an adverse decision based, in whole or in

part, upon a credit report must provide at no charge, a copy of

the credit report to the applicant or insured or provide the

applicant or insured with the name, address, and telephone

number of the consumer reporting agency from which the insured

or applicant may obtain the credit report. The insurer must

provide notification to the consumer explaining the reasons for

the adverse decision. The reasons must be provided in

sufficiently clear and specific language so that a person can

identify the basis for the insurer's adverse decision. Such

notification shall include a description of the four primary

reasons, or such fewer number as existed, which were the primary

influences of the adverse decision. The use of generalized terms

such as "poor credit history," "poor credit rating," or "poor

insurance score" does not meet the explanation requirements of

this paragraph. A credit score may not be used in underwriting

or rating insurance unless the scoring process produces

information in sufficient detail to permit compliance with the

requirements of this subsection. It shall not be deemed an

adverse decision if, due to the insured's credit report or

credit score, the insured continues to receive a less favorable

rate or placement in a less favorable tier or company at the

time of renewal except for renewals or re-underwriting required

by this section.

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(4)(a) An insurer may not request a credit report or score

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based upon the race, color, religion, marital status, age,

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gender, income, national origin, or place of residence of the

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applicant or insured.

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(b) An insurer may not make an adverse decision solely

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because of information contained in a credit report or score

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without consideration of any other underwriting or rating

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factor.

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credit score that could lead to such a decision if based, in

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whole or in part, on:

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1. The absence of, or an insufficient, credit history, in

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which instance the insurer shall:

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a. Treat the consumer as otherwise approved by the

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Department of Financial Services if the insurer presents

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information that such an absence or inability is related to the

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risk for the insurer;

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b. Treat the consumer as if the applicant or insured had

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neutral credit information, as defined by the insurer;

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c. Exclude the use of credit information as a factor and

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use only other underwriting criteria;

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2. Collection accounts with a medical industry code, if so

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identified on the consumer's credit report;

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3. Place of residence; or

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4. Any other circumstance that the Financial Services

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Commission determines, by rule, lacks sufficient statistical

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correlation and actuarial justification as a predictor of

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insurance risk.

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(d) An insurer may use the number of credit inquiries

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requested or made regarding the applicant or insured except for:

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1. Credit inquiries not initiated by the consumer or

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inquiries requested by the consumer for his or her own credit

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information.

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2. Inquiries relating to insurance coverage, if so

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identified on a consumer's credit report.

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3. Collection accounts with a medical industry code, if so

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identified on the consumer's credit report.

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4. Multiple lender inquiries, if coded by the consumer

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reporting agency on the consumer's credit report as being from

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the home mortgage industry and made within 30 days of one

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another, unless only one inquiry is considered.

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5. Multiple lender inquiries, if coded by the consumer

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reporting agency on the consumer's credit report as being from

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the automobile lending industry and made within 30 days of one

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another, unless only one inquiry is considered.

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(e) An insurer must, upon the request of an applicant or

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insured, provide a means of appeal for an applicant or insured

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whose credit report or credit score is unduly influenced by a

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dissolution of marriage, the death of a spouse, or temporary

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loss of employment. The insurer must complete its review within

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10 business days after the request by the applicant or insured

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and receipt of reasonable documentation requested by the

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insurer, and, if the insurer determines that the credit report

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or credit score was unduly influenced by any of such factors,

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the insurer shall treat the applicant or insured as if the

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applicant or insured had neutral credit information or shall

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exclude the credit information, as defined by the insurer,

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whichever is more favorable to the applicant or insured. An

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insurer shall not be considered out of compliance with its

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underwriting rules or rates or forms filed with the Office of

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Insurance Regulation or out of compliance with any other state

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law or rule as a result of granting any exceptions pursuant to

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this subsection.

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(5) A rate filing that uses credit reports or credit

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scores must comply with the requirements of s. 627.062 or s.

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627.0651 to ensure that rates are not excessive, inadequate, or

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unfairly discriminatory.

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(6) An insurer that requests or uses credit reports and

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credit scoring in its underwriting and rating methods shall

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maintain and adhere to established written procedures that

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reflect the restrictions set forth in the federal Fair Credit

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Reporting Act, this section, and all rules related thereto.

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(7)(a) An insurer shall establish procedures to review the

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credit history of an insured who was adversely affected by the

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use of the insured's credit history at the initial rating of the

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policy, or at a subsequent renewal thereof. This review must be

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performed at a minimum of once every 2 years or at the request

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of the insured, whichever is sooner, and the insurer shall

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adjust the premium of the insured to reflect any improvement in

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the credit history. The procedures must provide that, with

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respect to existing policyholders, the review of a credit report

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will not be used by the insurer to cancel, refuse to renew, or

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require a change in the method of payment or payment plan.

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(b) However, as an alternative to the requirements of

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paragraph (a), an insurer that used a credit report or credit

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score for an insured upon inception of a policy, who will not

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use a credit report or score for re-underwriting, shall

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reevaluate the insured within the first 3 years after inception,

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based on other allowable underwriting or rating factors,

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excluding credit information if the insurer does not increase

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the rates or premium charged to the insured based on the

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exclusion of credit reports or credit scores.

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(8) The commission may adopt rules to administer this

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section. The rules may include, but need not be limited to:

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(a) Information that must be included in filings to

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demonstrate compliance with subsection (3).

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(b) Statistical detail that insurers using credit reports

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or scores under subsection (5) must retain and report annually

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to the Office of Insurance Regulation.

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associated with the use of a credit report or score are not

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unfairly discriminatory, based upon race, color, religion,

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marital status, age, gender, income, national origin, or place

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of residence.

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(d) Standards for review of models, methods, programs, or

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any other process by which to grade or rank credit report data

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and which may produce credit scores in order to ensure that the

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insurer demonstrates that such grading, ranking, or scoring is

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valid in predicting insurance risk of an applicant or insured.

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Section 2. If any law amended by this act was also amended

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by a law enacted at the 2003 Regular Session of the Legislature,

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such laws shall be construed as if they had been enacted at the

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same session of the Legislature, and full effect shall be given

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to each if possible.

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Section 3. Contingent upon HB , providing a public

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records exemption for trade secrets for credit scoring

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methodologies and related data and information which are

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required to be filed with the Office of Insurance Regulation,

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becoming a law, this act shall take effect January 1, 2004, and

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shall apply to policies issued or renewed on or after that date.