Flsenate Archive: Session

HB 0233

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 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 purposes 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.

(d) Take an adverse action against a consumer solely

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

consideration of any other applicable factor independent of

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credit information.

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(e) Consider an absence of credit information or an

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inability to calculate an insurance score in underwriting or

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rating personal insurance, unless the insurer:

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1. Treats the consumer as otherwise approved by the Chief

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Financial Officer, if the insurer presents information that such

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

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

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neutral credit information, as defined by the insurer; or

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

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uses only other underwriting criteria.

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

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credit information unless an insurer obtains and uses a credit

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report issued or an insurance score calculated within 90 days

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

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

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months following the last time that the insurer obtained current

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credit information for the insured, the insurer recalculates the

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insurance score or obtains an updated credit report. Regardless

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of the requirements of this paragraph:

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

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

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the policy based upon a current credit report or insurance

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score. An insurer need not recalculate the insurance score or

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obtain the updated credit report of a consumer more frequently

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than once in a 12-month period.

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2. The insurer has the discretion to obtain current credit

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

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consistent with the insurer’s underwriting guidelines.

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3. No insurer need obtain current credit information for

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

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a. The insurer is treating the consumer as otherwise

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approved by the Chief Financial Officer;

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

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

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insurer shall have the discretion to order such report if

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consistent with its underwriting guidelines;

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c. Credit was not used for underwriting or rating such

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insured when the policy was initially written. However, the

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insurer has the discretion to use credit for underwriting or

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rating such insured upon renewal if consistent with its

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underwriting guidelines; or

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d. The insurer reevaluates the insured beginning no later

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than 36 months after inception and thereafter based upon other

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underwriting or rating factors, excluding credit information.

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

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insurance scoring methodology or in reviewing credit information

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for the purpose of underwriting or rating a policy of personal

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insurance:

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

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factor unless the insurer can provide evidence that the methods

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used to develop and implement the use of credit reports are

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valid in predicting insurance risk.

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(6) If it is determined through the dispute resolution

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

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

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insured was incorrect or incomplete and if the insurer receives

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notice of such determination from the consumer reporting agency

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or the insured, the insurer shall reunderwrite and rerate the

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consumer within 30 days after receiving the notice. After

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reunderwriting or rerating the insured, the insurer shall make

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any adjustments necessary consistent with its underwriting and

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rating guidelines. If an insurer determines that the insured has

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overpaid premium, the insurer shall refund to the insured the

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amount of overpayment calculated back to the shorter of the last

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12 months of coverage or the actual policy period.

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(7) If an insurer writing personal insurance uses credit

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information in underwriting or rating an applicant or consumer:

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

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insurance application or at the time the insurance application

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is taken, that the insurer may obtain credit information in

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connection with such application. Such disclosure shall be

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

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the application for insurance. The insurer need not provide the

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disclosure statement required under this paragraph to any

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insured on a renewal policy if such consumer has previously been

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provided a disclosure statement. Use of the following example

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disclosure statement constitutes compliance with this paragraph:

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“In connection with this application for insurance, we

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may review your credit report or obtain or use a

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credit-based insurance score based on the information

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contained in that credit report. We may use a third

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party in connection with the development of your

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insurance score.”

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(b) The insurer shall secure authorization from each

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applicant or consumer whose credit will be checked. If

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permission or authorization is not granted, the absent credit

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report shall be treated with neutrality and the applicant or

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consumer shall not be penalized.

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

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credit information, the insurer shall:

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(a) Provide notification to the consumer that an adverse

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action has been taken, in accordance with the requirements of

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

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(b) Provide notification to the consumer explaining the

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reasons for the adverse action. The reasons shall be provided

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in sufficiently clear and specific language so that a person can

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

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action. The insurer shall identify the specific items in the

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credit information which resulted in the adverse action. Such

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items must be described such that the applicant or consumer can

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identify and correct any errors included in the credit

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information that contributed to the adverse action. The use of

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

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

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not meet the explanation requirements of this paragraph.

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Standardized credit explanations provided by consumer reporting

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

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this subsection.

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(9) An insurer that uses insurance scores to underwrite

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and rate risks shall file its scoring models or other scoring

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processes with the Office of Insurance Regulation of the

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Financial Services Commission. A third party may file scoring

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models on behalf of an insurer. A filing that includes

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insurance scoring may include loss experience justifying the use

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of credit information. Any filing relating to credit information

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

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Florida Statutes.

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

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

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

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agent or a producer who obtains or uses credit information or

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insurance scores for an insurer, provided the agent or producer

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follows the instructions of or procedures established by the

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insurer and complies with any applicable law or regulation.

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Nothing in this subsection shall be construed to provide a

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

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exist in the absence of this subsection.

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

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

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part was submitted in conjunction with an insurance inquiry

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

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report or insurance score. Such information includes, but is

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

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any other information that may identify time periods during

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

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conditions of the consumer’s insurance coverage.

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

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apply to data or lists the consumer reporting agency supplies to

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the insurance agent or producer from whom information was

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received, the insurer on whose behalf such agent or producer

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

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restrict any insurer from obtaining a claims history report or a

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motor vehicle report.

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

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thereof to any person or circumstance is held invalid, the

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invalidity shall not affect other provisions or applications of

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the section which can be given effect without the invalid

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

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section are declared severable.

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Section 2.The Office of Insurance Regulation of the

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Financial Services Commission shall conduct a study of the use

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of credit information as an underwriting and rating factor. The

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study shall evaluate and determine the increased risk of

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insurance loss posed by an individual's credit worthiness,

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credit standing, or credit capacity and the appropriate weight

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that should be given to such factors in determining insurability

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in conjunction with other risk factors.

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Section 3. This act shall take effect October 1, 2003, and

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shall apply to personal insurance policies written to be

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effective or renewed on or after July 1, 2004.

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