HB 0109A 2003
   
1 A bill to be entitled
2          An act relating to the use of credit reports and credit
3    scores by insurers; creating s. 626.9741, F.S.; specifying
4    that the act's purpose is to regulate and limit the use of
5    credit reports and credit scores by insurers for
6    underwriting and rating purposes; specifying the types of
7    insurance to which the act applies; defining terms;
8    requiring that an insurer identify the items in a credit
9    report which resulted in an adverse decision; prohibiting
10    an insurer from making an adverse decision based solely on
11    a credit report or score or certain other factors;
12    requiring an insurer to provide a means for appeal to an
13    applicant or insured under certain circumstances;
14    prohibiting the use of a credit report or score unless the
15    Office of Insurance Regulation determines, based on a
16    filing by the insurer, that such use is valid and
17    reasonable; authorizing the Office of Insurance Regulation
18    to disapprove such filings; requiring an insurer to adhere
19    to certain laws and rules; requiring an insurer to provide
20    for an adjustment in the premium of an insured to reflect
21    an improvement in credit history; authorizing the
22    Financial Services Commission to adopt rules; providing
23    for application; providing for construction of the act in
24    pari materia with laws enacted during the 2003 Regular
25    Session of the Legislature; providing a contingent
26    effective date.
27         
28          Be It Enacted by the Legislature of the State of Florida:
29         
30          Section 1. Section 626.9741, Florida Statutes, is created
31    to read:
32          626.9741 Use of credit reports and credit scores by
33    insurers.--
34          (1) The purpose of this section is to regulate and limit
35    the use of credit reports and credit scores by insurers for
36    underwriting and rating purposes. This section applies only to
37    personal lines motor vehicle insurance and personal lines
38    residential insurance, which includes homeowners, mobile
39    homeowners dwelling, tenants, condominium unit owners,
40    cooperative unit owners, and similar types of insurance.
41          (2) As used in this section, the term:
42          (a) "Adverse decision" means a decision to refuse to issue
43    or renew a policy of insurance; to issue a policy with
44    exclusions or restrictions; to increase the rates or premium
45    charged for a policy of insurance; to place an insured or
46    applicant in a rating tier that does not have the lowest
47    available rates for which that insured or applicant is otherwise
48    eligible; or to place an applicant or insured with a company
49    operating under common management, control, or ownership which
50    does not offer the lowest rates available, within the affiliate
51    group of insurance companies, for which that insured or
52    applicant is otherwise eligible.
53          (b) "Credit report" means any written, oral, or other
54    communication of any information by a consumer reporting agency,
55    as defined in the federal Fair Credit Reporting Act, 15 U.S.C.
56    s. 1681, et seq., bearing on a consumer's credit worthiness,
57    credit standing, or credit capacity, which is used or expected
58    to be used or collected as a factor to establish a person's
59    eligibility for credit or insurance, or any other purpose
60    authorized pursuant to the applicable provision of such federal
61    act. A credit score alone, as calculated by a credit reporting
62    agency or by or for the insurer, may not be considered a credit
63    report.
64          (c) "Credit score" means a score, grade, or value that is
65    derived by using any or all data from a credit report in any
66    type of model, method, or program, whether electronically, in an
67    algorithm, computer software or program, or any other process,
68    for the purpose of grading or ranking credit report data.
69          (d) "Tier" means a category within a single insurer into
70    which insureds with substantially similar risk, exposure, or
71    expense factors are placed for purposes of determining rate or
72    premium.
73          (3) An insurer must inform an applicant or insured, in the
74    same medium as the application is taken, that a credit report or
75    score is being requested for underwriting or rating purposes. An
76    insurer that makes an adverse decision based, in whole or in
77    part, upon a credit report must provide at no charge, a copy of
78    the credit report to the applicant or insured or provide the
79    applicant or insured with the name, address, and telephone
80    number of the consumer reporting agency from which the insured
81    or applicant may obtain the credit report. The insurer must
82    provide notification to the consumer explaining the reasons for
83    the adverse decision. The reasons must be provided in
84    sufficiently clear and specific language so that a person can
85    identify the basis for the insurer's adverse decision. Such
86    notification shall include a description of the four primary
87    reasons, or such fewer number as existed, which were the primary
88    influences of the adverse decision. The use of generalized terms
89    such as "poor credit history," "poor credit rating," or "poor
90    insurance score" does not meet the explanation requirements of
91    this paragraph. A credit score may not be used in underwriting
92    or rating insurance unless the scoring process produces
93    information in sufficient detail to permit compliance with the
94    requirements of this subsection. It shall not be deemed an
95    adverse decision if, due to the insured's credit report or
96    credit score, the insured continues to receive a less favorable
97    rate or placement in a less favorable tier or company at the
98    time of renewal except for renewals or re-underwriting required
99    by this section.
100          (4)(a) An insurer may not request a credit report or score
101    based upon the race, color, religion, marital status, age,
102    gender, income, national origin, or place of residence of the
103    applicant or insured.
104          (b) An insurer may not make an adverse decision solely
105    because of information contained in a credit report or score
106    without consideration of any other underwriting or rating
107    factor.
108          (c) An insurer may not make an adverse decision or use a
109    credit score that could lead to such a decision if based, in
110    whole or in part, on:
111          1. The absence of, or an insufficient, credit history, in
112    which instance the insurer shall:
113          a. Treat the consumer as otherwise approved by the Office
114    of Insurance Regulation if the insurer presents information that
115    such an absence or inability is related to the risk for the
116    insurer;
117          b. Treat the consumer as if the applicant or insured had
118    neutral credit information, as defined by the insurer;
119          c. Exclude the use of credit information as a factor and
120    use only other underwriting criteria;
121          2. Collection accounts with a medical industry code, if so
122    identified on the consumer's credit report;
123          3. Place of residence; or
124          4. Any other circumstance that the Financial Services
125    Commission determines, by rule, lacks sufficient statistical
126    correlation and actuarial justification as a predictor of
127    insurance risk.
128          (d) An insurer may use the number of credit inquiries
129    requested or made regarding the applicant or insured except for:
130          1. Credit inquiries not initiated by the consumer or
131    inquiries requested by the consumer for his or her own credit
132    information.
133          2. Inquiries relating to insurance coverage, if so
134    identified on a consumer's credit report.
135          3. Collection accounts with a medical industry code, if so
136    identified on the consumer's credit report.
137          4. Multiple lender inquiries, if coded by the consumer
138    reporting agency on the consumer's credit report as being from
139    the home mortgage industry and made within 30 days of one
140    another, unless only one inquiry is considered.
141          5. Multiple lender inquiries, if coded by the consumer
142    reporting agency on the consumer's credit report as being from
143    the automobile lending industry and made within 30 days of one
144    another, unless only one inquiry is considered.
145          (e) An insurer must, upon the request of an applicant or
146    insured, provide a means of appeal for an applicant or insured
147    whose credit report or credit score is unduly influenced by a
148    dissolution of marriage, the death of a spouse, or temporary
149    loss of employment. The insurer must complete its review within
150    10 business days after the request by the applicant or insured
151    and receipt of reasonable documentation requested by the
152    insurer, and, if the insurer determines that the credit report
153    or credit score was unduly influenced by any of such factors,
154    the insurer shall treat the applicant or insured as if the
155    applicant or insured had neutral credit information or shall
156    exclude the credit information, as defined by the insurer,
157    whichever is more favorable to the applicant or insured. An
158    insurer shall not be considered out of compliance with its
159    underwriting rules or rates or forms filed with the Office of
160    Insurance Regulation or out of compliance with any other state
161    law or rule as a result of granting any exceptions pursuant to
162    this subsection.
163          (5) A rate filing that uses credit reports or credit
164    scores must comply with the requirements of s. 627.062 or s.
165    627.0651 to ensure that rates are not excessive, inadequate, or
166    unfairly discriminatory.
167          (6) An insurer that requests or uses credit reports and
168    credit scoring in its underwriting and rating methods shall
169    maintain and adhere to established written procedures that
170    reflect the restrictions set forth in the federal Fair Credit
171    Reporting Act, this section, and all rules related thereto.
172          (7)(a) An insurer shall establish procedures to review the
173    credit history of an insured who was adversely affected by the
174    use of the insured's credit history at the initial rating of the
175    policy, or at a subsequent renewal thereof. This review must be
176    performed at a minimum of once every 2 years or at the request
177    of the insured, whichever is sooner, and the insurer shall
178    adjust the premium of the insured to reflect any improvement in
179    the credit history. The procedures must provide that, with
180    respect to existing policyholders, the review of a credit report
181    will not be used by the insurer to cancel, refuse to renew, or
182    require a change in the method of payment or payment plan.
183          (b) However, as an alternative to the requirements of
184    paragraph (a), an insurer that used a credit report or credit
185    score for an insured upon inception of a policy, who will not
186    use a credit report or score for re-underwriting, shall
187    reevaluate the insured within the first 3 years after inception,
188    based on other allowable underwriting or rating factors,
189    excluding credit information if the insurer does not increase
190    the rates or premium charged to the insured based on the
191    exclusion of credit reports or credit scores.
192          (8) The commission may adopt rules to administer this
193    section. The rules may include, but need not be limited to:
194          (a) Information that must be included in filings to
195    demonstrate compliance with subsection (3).
196          (b) Statistical detail that insurers using credit reports
197    or scores under subsection (5) must retain and report annually
198    to the Office of Insurance Regulation.
199          (c) Standards that ensure that rates or premiums
200    associated with the use of a credit report or score are not
201    unfairly discriminatory, based upon race, color, religion,
202    marital status, age, gender, income, national origin, or place
203    of residence.
204          (d) Standards for review of models, methods, programs, or
205    any other process by which to grade or rank credit report data
206    and which may produce credit scores in order to ensure that the
207    insurer demonstrates that such grading, ranking, or scoring is
208    valid in predicting insurance risk of an applicant or insured.
209          Section 2. This act shall take effect January 1, 2004, and
210    shall apply to policies issued or renewed on or after that date,
211    except that this act shall not take effect unless HB 0111A or
212    substantially similar legislation is adopted in the same
213    legislative session, or an extension thereof, and becomes a law.