SRC-AMY, LBB S.B. 130 78(R)   BILL ANALYSIS


Senate Research Center   S.B. 130
By: Fraser
Business & Commerce
3/7/2003
As Filed


DIGEST AND PURPOSE 

Currently, 75 percent of the insurers that offer residential property
coverage use credit information, as do nine of the top 10 automobile
insurers. Many insurance companies doing business in Texas are not subject
to rate regulations. There has been a steady increase in the number of
consumer complaints about the use of credit information in homeowners and
automobile insurance in the past three years.  As proposed, S.B. 130
establishes requirements to guide insurers in their use of credit
information in residential property and automobile coverage and requires
companies to file their credit scoring models with the commissioner of
insurance. The bill also mandates an appeal process and requires insurers
to consider extenuating circumstances that may affect a consumer's credit
score.   

RULEMAKING AUTHORITY

Rulemaking Authority is expressly granted to the commissioner of insurance
in SECTION 1 (Article 21.21-10, Chapter 21B, Insurance Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 21B, Insurance Code, by adding Article
21.21-10, as follows: 

            Article 21.21-10.  CREDIT SCORING BY INSURERS OF RESIDENTIAL
PROPERTY AND PERSONAL AUTOMOBILES;  SANCTIONS   

Sec.  1.  DEFINITIONS.  Defines "adverse action," "insurance credit
score," "insurance credit score system," "insurer," "personal automobile
insurance," and "residential property insurance." 

 Sec.  2.  USERS OF CREDIT INFORMATION.  Specifies that an insurer that
uses 
 credit information  in whole or in part to determine whether to issue a
policy, the amount  
 and terms of coverage in the policy, the duration of the policy, the
rates and fees to be  
 charged in the policy, whether to cancel the policy, or whether to renew
the policy must  
 comply with the requirements of this article.

Sec.  3.  LIMITATION ON THE RELIANCE ON CREDIT SCORES.  Prohibits an
insurer from rejecting, canceling, or refusing to renew a personal
automobile insurance policy or residential property insurance policy based
solely on a credit score. 

 Sec.  4.  DISPUTED OR INACCURATE CREDIT INFORMATION.  Prohibits 
 an insurer from using disputed credit information in determining a credit
score and  
 specifies when an insurer is required to rerun a credit check and
recalculate credit scores. 

Sec.  5.  LIMITED CREDIT HISTORY.  Prohibits an insurer from using a
person's lack of or limited credit history as a sole determining factor in
determining whether to issue a  policy. 

Sec.  6.  MEDICAL COLLECTION INFORMATION.  Prohibits an insurer from using
medical collection information in determining a credit score. 

 Sec.  7.  IMPROPER USES OF CREDIT INFORMATION AND SCORING.  Specifies
improper uses of credit information  and scoring that an insurer is
prohibited from using. 

Sec.  8.  DISCLOSURE REQUIREMENTS.  Requires an insurer to follow
specified disclosure requirements in relation to the insurance credit
scoring process as it relates to the insurer's customers. 

Sec.  9.  FILING OF CREDIT SCORING MODELS.  Requires an insurer that uses
insurance credit scoring to file the insurer's insurance credit scoring
models or methodologies for residential property insurance and personal
automobile insurance with the commissioner of insurance (commissioner). 

 Sec.  10.  CONFIDENTIALITY OF CREDIT SCORING MODEL.  Specifies that 
credit scoring models filed with the commissioner of insurance for
purposes of compliance with this article are not subject to disclosure. 

Sec.  11.  RIGHT TO APPEAL.  (a) Requires an insurer to reconsider an
adverse action that has been appealed  by the insured or applicant for
insurance. 

(b)  Sets forth circumstances under which an appeal may be filed,
including catastrophic illness or injury, temporary loss of employment,
death of an immediate family member, or other grounds determined by the
commissioner. 

(c)  Requires an insurer in considering an appeal to make reasonable
exceptions for credit scores adversely affected by any factors specified
in Subsection (b) of this section. 

(d)  Requires an insurer to implement a procedure for appeals that
conforms with rules adopted by the commissioner.  

Sec.  12.  RULES.  (a)  Requires the commissioner to adopt rules governing
the procedure for appeals, including time periods to file, means of
notification, grounds for appeal, provisions for review, determination of
appeal, time frames for decision, means of notification of decision, and
other reasonable and necessary rules as determined by the commissioner to
implement the appeals process under this section and Section 11 of this
article. 

Sec.  13.  SANCTIONS.  Requires that an insurer be subject to penalties if
the commissioner determines insurer has violated any provision of this
article. 

SECTION 2.  Requires the commissioner to adopt rules governing the
procedures for appeal and any other rules as necessary to implement the
provisions of this Act by the 120th day after the effective date of this
act. 

SECTION 3.  Provides time frames for insurers using an insurance credit
score system to file insurance credit scoring models with the
commissioner. 

SECTION 4.  Makes application of this Act prospective to the 120th day
after the effective date of this Act. 

SECTION 5.  Effective date:  June 1, 2003 or September 1, 2003.