Flsenate Archive: Session

HB 0987

2003

CHAMBER ACTION

The Committee on Insurance recommends the following:

Committee Substitute

Remove the entire bill and insert:

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

a purpose to regulate and limit the use of credit reports

and credit scores by insurers for underwriting and rating

purposes; specifying application to types of insurance;

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; authorizing insurers to use the

number of credit inquiries for certain purposes; providing

exceptions; 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 under certain circumstances; 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 an

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:

1. Refuse to issue or renew a policy of insurance;

2. Issue a policy with exclusions or restrictions;

3. Increase the rates or premium charged for a policy of

insurance;

4. 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

5. 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 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 shall 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 shall 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

shall 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 the insured

or applicant 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 subsection. A credit score may not be used

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in underwriting or rating insurance unless the scoring process

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produces information in sufficient detail to permit compliance

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with the requirements of this subsection. It shall not be deemed

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

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credit score, the insured continues to receive a less favorable

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

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time of renewal except for renewals or re-underwriting required

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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 an adverse 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; or

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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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a. The home mortgage industry and made within 30 days of

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each another, unless only one inquiry is considered; or

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b. The automobile lending industry and made within 30 days

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of each another, unless only one inquiry is considered.

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(e) An insurer shall, 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 shall 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 insurer

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

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score was unduly influenced by either of such factors, the

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insurer shall treat the applicant or insured as if the applicant

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or insured had neutral credit information or shall exclude the

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credit information, as defined by the insurer, whichever is more

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favorable to the applicant or insured. An insurer shall not be

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deemed out of compliance with its underwriting rules or rates or

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forms filed with the Office of Insurance Regulation or out of

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compliance with any other state law or rule as a result of

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granting any exceptions pursuant to 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 to such act

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and this section.

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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 of the policy. Such review

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shall be performed at least once every 2 years or at the request

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of the insured, whichever is sooner, and the premium of the

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insured shall be adjusted to reflect any improvement in the

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insured’s 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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shall not be used by the insurer to cancel or refuse to renew a

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policy or require a change in the method of payment or payment

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plan.

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(b) As an alternative to the requirements of paragraph

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(a), an insurer that used a credit report or credit score for an

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insured upon inception of a policy, who will not use a credit

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report or score for reunderwriting purposes, shall reevaluate

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the insured within the first 3 years after inception, based on

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other allowable underwriting or rating factors, excluding credit

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information, if the insurer does not increase the rates or

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premium charged to the insured based on the exclusion of credit

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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. 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.