HB 0987 2003
1	CHAMBER ACTION
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6	The Committee on Insurance recommends the following:
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8	Committee Substitute
9	Remove the entire bill and insert:
10	A bill to be entitled
11	An act relating to the use of credit reports and credit
12	scores by insurers; creating s. 626.9741, F.S.; specifying
13	a purpose to regulate and limit the use of credit reports
14	and credit scores by insurers for underwriting and rating
15	purposes; specifying application to types of insurance;
16	defining terms; requiring that an insurer identify the
17	items in a credit report which resulted in an adverse
18	decision; prohibiting an insurer from making an adverse
19	decision based solely on a credit report or score or
20	certain other factors; authorizing insurers to use the
21	number of credit inquiries for certain purposes; providing
22	exceptions; requiring an insurer to provide a means for
23	appeal to an applicant or insured under certain
24	circumstances; prohibiting the use of a credit report or
25	score under certain circumstances; authorizing the Office
26	of Insurance Regulation to disapprove such filings;
27	requiring an insurer to adhere to certain laws and rules;
28	requiring an insurer to provide for an adjustment in the
29	premium of an insured to reflect an improvement in credit
30	history; authorizing the Financial Services Commission to
31	adopt rules; providing for application; providing an
32	effective date.
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34	Be It Enacted by the Legislature of the State of Florida:
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36	Section 1. Section 626.9741, Florida Statutes, is created
37	to read:
38	626.9741 Use of credit reports and credit scores by
39	insurers.--
40	(1) The purpose of this section is to regulate and limit
41	the use of credit reports and credit scores by insurers for
42	underwriting and rating purposes. This section applies only to
43	personal lines motor vehicle insurance and personal lines
44	residential insurance, which includes homeowners, mobile
45	homeowners dwelling, tenants, condominium unit owners,
46	cooperative unit owners, and similar types of insurance.
47	(2) As used in this section, the term:
48	(a) "Adverse decision" means a decision to:
49	1. Refuse to issue or renew a policy of insurance;
50	2. Issue a policy with exclusions or restrictions;
51	3. Increase the rates or premium charged for a policy of
52	insurance;
53	4. Place an insured or applicant in a rating tier that
54	does not have the lowest available rates for which that insured
55	or applicant is otherwise eligible; or
56	5. Place an applicant or insured with a company operating
57	under common management, control, or ownership which does not
58	offer the lowest rates available, within the affiliate group of
59	insurance companies, for which that insured or applicant is
60	otherwise eligible.
61	(b) "Credit report" means any written, oral, or other
62	communication of any information by a consumer reporting agency,
63	as defined in the Federal Fair Credit Reporting Act, 15 U.S.C.
64	s. 1681, et seq., bearing on a consumer's credit worthiness,
65	credit standing, or credit capacity, which is used or expected
66	to be used or collected as a factor to establish a person's
67	eligibility for credit or insurance, or any other purpose
68	authorized pursuant to the applicable provision of such federal
69	act. A credit score alone, as calculated by a credit reporting
70	agency or by or for the insurer, may not be considered a credit
71	report.
72	(c) "Credit score" means a score, grade, or value that is
73	derived by using any data from a credit report in any type of
74	model, method, or program, whether electronically, in an
75	algorithm, computer software or program, or any other process,
76	for the purpose of grading or ranking credit report data.
77	(d) "Tier" means a category within a single insurer into
78	which insureds with substantially similar risk, exposure, or
79	expense factors are placed for purposes of determining rate or
80	premium.
81	(3) An insurer shall inform an applicant or insured, in
82	the same medium as the application is taken, that a credit
83	report or score is being requested for underwriting or rating
84	purposes. An insurer that makes an adverse decision based, in
85	whole or in part, upon a credit report shall provide at no
86	charge a copy of the credit report to the applicant or insured
87	or provide the applicant or insured with the name, address, and
88	telephone number of the consumer reporting agency from which the
89	insured or applicant may obtain the credit report. The insurer
90	shall provide notification to the consumer explaining the
91	reasons for the adverse decision. The reasons must be provided
92	in sufficiently clear and specific language so that the insured
93	or applicant can identify the basis for the insurer's adverse
94	decision. Such notification shall include a description of the
95	four primary reasons, or such fewer number as existed, which
96	were the primary influences of the adverse decision. The use of
97	generalized terms such as "poor credit history," "poor credit
98	rating," or "poor insurance score" does not meet the explanation
99	requirements of this subsection. A credit score may not be used
100	in underwriting or rating insurance unless the scoring process
101	produces information in sufficient detail to permit compliance
102	with the requirements of this subsection. It shall not be deemed
103	an adverse decision if, due to the insured's credit report or
104	credit score, the insured continues to receive a less favorable
105	rate or placement in a less favorable tier or company at the
106	time of renewal except for renewals or re-underwriting required
107	by this section.
108	(4)(a) An insurer may not request a credit report or score
109	based upon the race, color, religion, marital status, age,
110	gender, income, national origin, or place of residence of the
111	applicant or insured.
112	(b) An insurer may not make an adverse decision solely
113	because of information contained in a credit report or score
114	without consideration of any other underwriting or rating
115	factor.
116	(c) An insurer may not make an adverse decision or use a
117	credit score that could lead to an adverse decision if based, in
118	whole or in part, on:
119	1. The absence of or an insufficient credit history, in
120	which instance the insurer shall:
121	a. Treat the consumer as otherwise approved by the
122	Department of Financial Services if the insurer presents
123	information that such an absence or inability is related to the
124	risk for the insurer;
125	b. Treat the consumer as if the applicant or insured had
126	neutral credit information, as defined by the insurer; or
127	c. Exclude the use of credit information as a factor and
128	use only other underwriting criteria;
129	2. Collection accounts with a medical industry code, if so
130	identified on the consumer's credit report;
131	3. Place of residence; or
132	4. Any other circumstance that the Financial Services
133	Commission determines, by rule, lacks sufficient statistical
134	correlation and actuarial justification as a predictor of
135	insurance risk.
136	(d) An insurer may use the number of credit inquiries
137	requested or made regarding the applicant or insured except for:
138	1. Credit inquiries not initiated by the consumer or
139	inquiries requested by the consumer for his or her own credit
140	information.
141	2. Inquiries relating to insurance coverage, if so
142	identified on a consumer’s credit report.
143	3. Collection accounts with a medical industry code, if so
144	identified on the consumer’s credit report.
145	4. Multiple lender inquiries, if coded by the consumer
146	reporting agency on the consumer’s credit report as being from:
147	a. The home mortgage industry and made within 30 days of
148	each another, unless only one inquiry is considered; or
149	b. The automobile lending industry and made within 30 days
150	of each another, unless only one inquiry is considered.
151	(e) An insurer shall, upon the request of an applicant or
152	insured, provide a means of appeal for an applicant or insured
153	whose credit report or credit score is unduly influenced by a
154	dissolution of marriage, the death of a spouse, or temporary
155	loss of employment. The insurer shall complete its review within
156	10 business days after the request by the applicant or insured
157	and receipt of reasonable documentation requested by the insurer
158	and, if the insurer determines that the credit report or credit
159	score was unduly influenced by either of such factors, the
160	insurer shall treat the applicant or insured as if the applicant
161	or insured had neutral credit information or shall exclude the
162	credit information, as defined by the insurer, whichever is more
163	favorable to the applicant or insured. An insurer shall not be
164	deemed out of compliance with its underwriting rules or rates or
165	forms filed with the Office of Insurance Regulation or out of
166	compliance with any other state law or rule as a result of
167	granting any exceptions pursuant to this subsection.
168	(5) A rate filing that uses credit reports or credit
169	scores must comply with the requirements of s. 627.062 or s.
170	627.0651 to ensure that rates are not excessive, inadequate, or
171	unfairly discriminatory.
172	(6) An insurer that requests or uses credit reports and
173	credit scoring in its underwriting and rating methods shall
174	maintain and adhere to established written procedures that
175	reflect the restrictions set forth in the Federal Fair Credit
176	Reporting Act, this section, and all rules related to such act
177	and this section.
178	(7)(a) An insurer shall establish procedures to review the
179	credit history of an insured who was adversely affected by the
180	use of the insured's credit history at the initial rating of the
181	policy, or at a subsequent renewal of the policy. Such review
182	shall be performed at least once every 2 years or at the request
183	of the insured, whichever is sooner, and the premium of the
184	insured shall be adjusted to reflect any improvement in the
185	insured’s credit history. The procedures must provide that, with
186	respect to existing policyholders, the review of a credit report
187	shall not be used by the insurer to cancel or refuse to renew a
188	policy or require a change in the method of payment or payment
189	plan.
190	(b) As an alternative to the requirements of paragraph
191	(a), an insurer that used a credit report or credit score for an
192	insured upon inception of a policy, who will not use a credit
193	report or score for reunderwriting purposes, shall reevaluate
194	the insured within the first 3 years after inception, based on
195	other allowable underwriting or rating factors, excluding credit
196	information, if the insurer does not increase the rates or
197	premium charged to the insured based on the exclusion of credit
198	reports or credit scores.
199	(8) The commission may adopt rules to administer this
200	section. The rules may include, but need not be limited to:
201	(a) Information that must be included in filings to
202	demonstrate compliance with subsection (3).
203	(b) Statistical detail that insurers using credit reports
204	or scores under subsection (5) must retain and report annually
205	to the Office of Insurance Regulation.
206	(c) Standards that ensure that rates or premiums
207	associated with the use of a credit report or score are not
208	unfairly discriminatory based upon race, color, religion,
209	marital status, age, gender, income, national origin, or place
210	of residence.
211	(d) Standards for review of models, methods, programs, or
212	any other process by which to grade or rank credit report data
213	and which may produce credit scores in order to ensure that the
214	insurer demonstrates that such grading, ranking, or scoring is
215	valid in predicting insurance risk of an applicant or insured.
216	Section 2. This act shall take effect January 1, 2004, and
217	shall apply to policies issued or renewed on or after that date.