Flsenate Archive: Session

HB 0133A

2003

A bill to be entitled

An act relating to use of consumer credit information in

personal insurance underwriting; providing a popular

reference name; providing a purpose; providing

application; providing definitions; specifying prohibited

activities for insurers using credit information for

certain purposes; requiring insurers to reunderwrite or

rerate consumers under certain circumstances; requiring a

refund under certain circumstances; requiring insurers to

disclose certain credit information acquisition

activities under certain circumstances and to secure

authorization for such activities; requiring insurers to

provide certain notice of adverse actions; providing

criteria; requiring insurers to file certain scoring

models or processes with the Office of Insurance

Regulation of the Financial Services Commission;

requiring insurers to indemnify, defend, and hold

harmless certain agents from liability, fees, and costs

under certain circumstances; prohibiting consumer

reporting agencies from providing or selling certain

lists or data relating to certain consumer credit

information; providing an exception; providing

severability; requiring the Office of Insurance

Regulation of the Financial Services Commission to

conduct a study of the use of credit information for

underwriting and rating purposes; providing study

criteria; providing for construction of the act in pari

materia with laws enacted during the 2003 Regular Session

of the Legislature; providing an effective date.

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

Section 1. (1) This section may be popularly referred to

as the “Use of Credit Information in Personal Insurance Act.”

(2) The purpose of this section is to regulate the use of

credit information for personal insurance to protect consumers

with respect to the use of such information.

(3) This section applies to personal insurance only. For

purposes of this section, “personal insurance” means private

passenger automobile, homeowners’, motorcycle, mobile-

homeowners’, and noncommercial dwelling fire insurance policies

and boat, personal watercraft, snowmobile, and recreational

vehicle insurance policies. Such policies must be individually

underwritten for personal, family, or household use. No other

type of insurance shall be included as personal insurance for

purposes of this section.

(4) For purposes of this section:

(a) “Adverse action” means a denial or cancellation of, an

increase in any charge for, or a reduction or other adverse or

unfavorable change in the terms of coverage or amount of any

insurance, existing or applied for, in connection with the

underwriting of personal insurance.

(b) “Affiliate” means any company that controls, is

controlled by, or is under common control with another company.

coverage under a personal insurance policy with an insurer.

(d) “Consumer” means an insured whose credit information

is used or whose insurance score is calculated in the

underwriting or rating of a personal insurance policy or an

applicant for such a policy.

(e) “Consumer reporting agency” means any entity which,

for monetary fees or dues, or on a cooperative nonprofit basis,

regularly engages in whole or in part in the practice of

assembling or evaluating consumer credit information or other

information on consumers for the purpose of furnishing consumer

reports to third parties.

(f) “Credit information” means any credit-related

information derived from a credit report, found on a credit

report itself, or provided on an application for personal

insurance. Information that is not credit-related shall not be

considered credit information, regardless of whether it is

contained in a credit report or in an application or is used to

calculate an insurance score.

(g) “Credit report” means any written, oral, or other

communication of information by a consumer reporting agency

bearing on a consumer’s credit worthiness, credit standing, or

credit capacity which is used or expected to be used or

collected in whole or in part for the purpose of serving as a

factor to determine personal insurance premiums, eligibility for

coverage, or tier placement.

(h) “Insurance score” means 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

for the purpose of predicting the future insurance loss exposure

of an individual applicant or insured.

(5) An insurer authorized to do business in this state

that uses credit information to underwrite or rate risks shall

not:

(a) Use an insurance score that is calculated using

income, gender, address, zip code, ethnic group, religion,

marital status, or nationality of the consumer as a factor.

(b) Deny, cancel, or nonrenew a policy of personal

insurance solely on the basis of credit information without

consideration of any other applicable factor independent of

credit information and not expressly prohibited by paragraph

(a).

solely upon credit information without consideration of any

other applicable factor independent of credit information.

100

(d) Take an adverse action against a consumer solely

101

because he or she does not have a credit card account without

102

consideration of any other applicable factor independent of

103

credit information.

104

(e) Consider an absence of credit information or an

105

inability to calculate an insurance score in underwriting or

106

rating personal insurance, unless the insurer:

107

1. Treats the consumer as otherwise approved by the Chief

108

Financial Officer, if the insurer presents information that such

109

an absence or inability relates to the risk for the insurer;

110

2. Treats the consumer as if the applicant or insured had

111

neutral credit information, as defined by the insurer; or

112

3. Excludes the use of credit information as a factor and

113

uses only other underwriting criteria.

114

(f) Take an adverse action against a consumer based upon

115

credit information unless an insurer obtains and uses a credit

116

report issued or an insurance score calculated within 90 days

117

after the date the policy is first written or renewal is issued.

118

(g) Use credit information unless, not later than every 36

119

months following the last time that the insurer obtained current

120

credit information for the insured, the insurer recalculates the

121

insurance score or obtains an updated credit report. Regardless

122

of the requirements of this paragraph:

123

1. At annual renewal, upon the request of a consumer or

124

the consumer's agent, the insurer shall reunderwrite and rerate

125

the policy based upon a current credit report or insurance

126

score. An insurer need not recalculate the insurance score or

127

obtain the updated credit report of a consumer more frequently

128

than once in a 12-month period.

129

2. The insurer has the discretion to obtain current credit

130

information upon any renewal before the 36-month period, if

131

consistent with the insurer’s underwriting guidelines.

132

3. No insurer need obtain current credit information for

133

an insured, despite the requirements of subparagraph 1., if:

134

a. The insurer is treating the consumer as otherwise

135

approved by the Chief Financial Officer;

136

b. The insured is in the most favorably priced tier of the

137

insurer, within a group of affiliated insurers. However, the

138

insurer shall have the discretion to order such report if

139

consistent with its underwriting guidelines;

140

c. Credit was not used for underwriting or rating such

141

insured when the policy was initially written. However, the

142

insurer has the discretion to use credit for underwriting or

143

rating such insured upon renewal if consistent with its

144

underwriting guidelines; or

145

d. The insurer reevaluates the insured beginning no later

146

than 36 months after inception and thereafter based upon other

147

underwriting or rating factors, excluding credit information.

148

(h) Use the following as a negative factor in any

149

insurance scoring methodology or in reviewing credit information

150

for the purpose of underwriting or rating a policy of personal

151

insurance:

152

1. Credit inquiries not initiated by the consumer or

153

inquiries requested by the consumer for his or her own credit

154

information.

155

2. Inquiries relating to insurance coverage, if so

156

identified on a consumer’s credit report.

157

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

158

identified on the consumer’s credit report.

159

4. Multiple lender inquiries, if coded by the consumer

160

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

161

the home mortgage industry and made within 30 days of one

162

another, unless only one inquiry is considered.

163

5. Multiple lender inquiries, if coded by the consumer

164

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

165

the automobile lending industry and made within 30 days of one

166

another, unless only one inquiry is considered.

167

(i) Use a credit report as an underwriting or rating

168

factor unless the insurer can provide evidence that the methods

169

used to develop and implement the use of credit reports are

170

valid in predicting insurance risk.

171

(6) If it is determined through the dispute resolution

172

process set forth in the federal Fair Credit Reporting Act, 15

173

U.S.C. s. 1681i(a)(5), that the credit information of a current

174

insured was incorrect or incomplete and if the insurer receives

175

notice of such determination from the consumer reporting agency

176

or the insured, the insurer shall reunderwrite and rerate the

177

consumer within 30 days after receiving the notice. After

178

reunderwriting or rerating the insured, the insurer shall make

179

any adjustments necessary consistent with its underwriting and

180

rating guidelines. If an insurer determines that the insured has

181

overpaid premium, the insurer shall refund to the insured the

182

amount of overpayment calculated back to the shorter of the last

183

12 months of coverage or the actual policy period.

184

(7) If an insurer writing personal insurance uses credit

185

information in underwriting or rating an applicant or consumer:

186

(a) The insurer or its agent shall disclose, on the

187

insurance application or at the time the insurance application

188

is taken, that the insurer may obtain credit information in

189

connection with such application. Such disclosure shall be

190

either written or provided to an applicant in the same medium as

191

the application for insurance. The insurer need not provide the

192

disclosure statement required under this paragraph to any

193

insured on a renewal policy if such consumer has previously been

194

provided a disclosure statement. Use of the following example

195

disclosure statement constitutes compliance with this paragraph:

196

197

“In connection with this application for insurance, we

198

may review your credit report or obtain or use a

199

credit-based insurance score based on the information

200

contained in that credit report. We may use a third

201

party in connection with the development of your

202

insurance score.”

203

204

(b) The insurer shall secure authorization from each

205

applicant or consumer whose credit will be checked. If

206

permission or authorization is not granted, the absent credit

207

report shall be treated with neutrality and the applicant or

208

consumer shall not be penalized.

209

(8) If an insurer takes an adverse action based upon

210

credit information, the insurer shall:

211

(a) Provide notification to the consumer that an adverse

212

action has been taken, in accordance with the requirements of

213

the federal Fair Credit Reporting Act, 15 U.S.C. s. 1681m(a).

214

(b) Provide notification to the consumer explaining the

215

reasons for the adverse action. The reasons shall be provided

216

in sufficiently clear and specific language so that a person can

217

identify the basis for the insurer’s decision to take an adverse

218

action. The insurer shall identify the specific items in the

219

credit information which resulted in the adverse action. Such

220

items must be described such that the applicant or consumer can

221

identify and correct any errors included in the credit

222

information that contributed to the adverse action. The use of

223

generalized terms, including, but not limited to, “poor credit

224

history,” “poor credit rating,” or “poor insurance score,” does

225

not meet the explanation requirements of this paragraph.

226

227

Standardized credit explanations provided by consumer reporting

228

agencies or other third-party vendors are deemed to comply with

229

this subsection.

230

(9) An insurer that uses insurance scores to underwrite

231

and rate risks shall file its scoring models or other scoring

232

processes with the Office of Insurance Regulation of the

233

Financial Services Commission. A third party may file scoring

234

models on behalf of an insurer. A filing that includes

235

insurance scoring may include loss experience justifying the use

236

of credit information. Any filing relating to credit information

237

is considered a trade secret under s. 688.002 or s. 812.081,

238

Florida Statutes.

239

(10) An insurer shall indemnify, defend, and hold agents

240

harmless from and against all liability, fees, and costs arising

241

out of or relating to the actions, errors, or omissions of an

242

agent or a producer who obtains or uses credit information or

243

insurance scores for an insurer, provided the agent or producer

244

follows the instructions of or procedures established by the

245

insurer and complies with any applicable law or regulation.

246

Nothing in this subsection shall be construed to provide a

247

consumer or other insured with a cause of action that does not

248

exist in the absence of this subsection.

249

(11)(a) No consumer reporting agency shall provide or sell

250

data or lists that include any information that in whole or in

251

part was submitted in conjunction with an insurance inquiry

252

about a consumer’s credit information or a request for a credit

253

report or insurance score. Such information includes, but is

254

not limited to, the expiration dates of an insurance policy or

255

any other information that may identify time periods during

256

which a consumer’s insurance may expire and the terms and

257

conditions of the consumer’s insurance coverage.

258

(b) The restrictions provided in paragraph (a) do not

259

apply to data or lists the consumer reporting agency supplies to

260

the insurance agent or producer from whom information was

261

received, the insurer on whose behalf such agent or producer

262

acted, or such insurer’s affiliates or holding companies.

263

264

restrict any insurer from obtaining a claims history report or a

265

motor vehicle report.

266

(12) If any provision of this section or the application

267

thereof to any person or circumstance is held invalid, the

268

invalidity shall not affect other provisions or applications of

269

the section which can be given effect without the invalid

270

provision or application, and to this end the provisions of this

271

section are declared severable.

272

Section 2. The Office of Insurance Regulation of the

273

Financial Services Commission shall conduct a study of the use

274

of credit information as an underwriting and rating factor. The

275

study shall evaluate and determine the increased risk of

276

insurance loss posed by an individual's credit worthiness,

277

credit standing, or credit capacity and the appropriate weight

278

that should be given to such factors in determining insurability

279

in conjunction with other risk factors.

280

Section 3. If any law amended by this act was also amended

281

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

282

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

283

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

284

to each if possible.

285

Section 4. This act shall take effect October 1, 2003, and

286

shall apply to personal insurance policies written to be

287

effective or renewed on or after July 1, 2004.