HBA-DMH C.S.H.B. 530 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 530 By: Wise Insurance 3/23/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Current law does not prohibit an insurer from considering a person's credit history when underwriting an insurance policy. Some insurers run credit checks when a policyholder renews or changes a policy. A person's policy may be canceled because of a poor credit rating even though the policyholder consistently paid the premium on time. According to the office of public insurance counsel, in 1999, 32 percent of homeowners insurance applicants and 46 percent of automobile insurance applicants were denied coverage or renewal of their policy by insurance companies because of their credit history. C.S.H.B. 530 provides that an insurer must provide its standards from making certain underwriting decisions based on credit history to the commissioner of insurance and the office of public insurance counsel. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS C.S.H.B. 530 amends the Insurance Code to establish that before an insurer may make an underwriting decision based in whole or in part on a credit report, the insurer must provide its credit report use standards to the commissioner of insurance (commissioner) and the office of public insurance counsel (OPIC). The bill specifies what the standards must include and the types of policies to which these provisions apply. The bill provides that an insurer is not prohibited from refusing to allow premium payment in installments for a person whose failure to pay premiums for an insurance policy caused a lapse in that policy during the two years preceding the date on which the request to pay premiums in installments is made. The bill authorizes an insurer that provides information to the commissioner or OPIC to ask the commissioner to determine whether the information is confidential under provisions relating to exemptions for certain commercial or financial information. The bill provides that the information is confidential until the commissioner makes a determination and that a determination that the information is confidential does not apply to a hearing or other proceeding to determine whether an insurer has violated an antidiscrimination law. The bill provides that an insurer who violates these provisions commits an unfair practice in violation of provisions relating to unfair competition and unfair practices and is subject to applicable penalties. EFFECTIVE DATE September 1, 2001. The Act applies only to an insurance policy that is delivered, issued for delivery, or renewed on or after January 1, 2002. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 530 modifies the original bill by establishing that an insurer's standards for underwriting decisions based on a credit report must be provided to the commissioner of insurance and the office of public insurance counsel and by removing the prohibition that an insurer may not make an underwriting decision based in whole or in part on a credit report. The substitute sets forth provisions for confidentiality of information and standards and adds to the definition of credit report a report regarding an individual's credit capacity.