SRC-JLB, TAG S.B. 99 78(R)   BILL ANALYSIS


Senate Research Center   S.B. 99
78R1520 PB-DBy: Van de Putte
Business & Commerce
3/7/2003
As Filed


DIGEST AND PURPOSE 

Currently, insurance companies use credit information to determine whether
to write a homeowners or personal automobile policy upon initial
application, whether to renew an existing policy, and what rate to charge.
Insurance companies use credit information to derive this score, which
varies significantly by company.  As a result, some consumers pay higher
premiums than they would have paid with another company, while others pay
less.  As proposed, S.B. 99 bans the use of credit scoring in underwriting
policies. 
            
RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the commissioner of insurance
in SECTION 1 
(Article 21.49-2Q, Section 4, Insurance Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 21E, Insurance Code, by adding Article
21.49-2Q, as follows: 

 Art. 21.49-2Q.  PROHIBITION ON USE OF CERTAIN UNDERWRITING 
            GUIDELINES BASED ON CREDIT SCORING

Sec. 1. DEFINITIONS.  Defines "applicant for insurance coverage,"
"consumer reporting agency," "credit report," "credit score," "insurer,"
and "underwriting guideline." 

Sec. 2. APPLICATION.  Provides that this article applies only to an
insurer that writes certain policy types. 

Sec. 3.  PROHIBITION; EXEMPTION.  (a)  Prohibits an insurer from using an
underwriting guideline that is based in whole or in part on the credit
report or credit score of an applicant for insurance coverage or any
person other than the named applicant who would be insured under the
policy.   

(b)  Provides that this section does not apply to the use of a credit
report or credit score by an insurer solely to determine whether the
insurer will offer an installment payment plan for the payment of premiums
to an applicant for insurance coverage. 

Sec. 4.  RULES.  Authorizes the commissioner of insurance to adopt
necessary rules to implement this article. 

Sec. 5.  PENALTY.  Provides that an insurer who violates this article
commits an unfair practice in violation of Article 21.21 (Unfair
Competition and Unfair Practices) of this code. 

 SECTION 2.  Makes application of this Act prospective to January 1, 2004.

SECTION 3.  Effective date: September 1, 2003.