78R963 PB-D

By:  Burnam                                                       H.B. No. 115



A BILL TO BE ENTITLED

AN ACT

relating to the use of credit scoring in underwriting certain lines 
of insurance coverage; providing a penalty.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Subchapter E, Chapter 21, Insurance Code, is 
amended by adding Article 21.49-2M to read as follows:
	Art. 21.49-2M.  PROHIBITION ON USE OF CERTAIN UNDERWRITING 
GUIDELINES BASED ON CREDIT SCORING
	Sec. 1.  DEFINITIONS. In this article:                                  
		(1)  "Applicant for insurance coverage"  includes an 
applicant for new coverage and a policyholder renewing coverage.
		(2)  "Credit report" means a written or electronic 
communication of any information by a consumer reporting agency 
that:
			(A)  bears on an individual's creditworthiness, 
credit standing, or credit capacity; and
			(B)  is used or collected in whole or in part to 
serve as a factor in determining eligibility for insurance 
coverage.
		(3)  "Insurance credit score" means a numerical 
representation of the insurance risk presented by an individual 
that uses attributes of the individual derived from a credit report 
or credit information in a formula to assess insurance risk on an 
actuarial or statistical basis.
		(4)  "Insurer" means an insurer authorized to write 
property and casualty insurance in this state.  The term includes:
			(A)  a county mutual insurance company, farm 
mutual insurance company, Lloyd's plan, and a reciprocal or 
interinsurance exchange; and
			(B)  the affiliate of such an insurer, as 
described by Section 823.003 of this code.
		(5)  "Underwriting guideline" means a rule, standard, 
marketing decision, or practice that is used by an insurer or an 
agent of an insurer to examine, bind, accept, reject, cancel, or 
limit insurance coverage to groups of consumers of insurance.
	Sec. 2.  APPLICATION.  This article applies only to an 
insurer that writes:
		(1)  a personal automobile insurance policy;                           
		(2)  a homeowners or farm and ranch owners insurance 
policy; or      
		(3)  a fire and allied lines or a farm and ranch 
insurance policy.   
	Sec. 3.  PROHIBITION; EXEMPTION.  (a)  An insurer may not use 
an underwriting guideline that is based in whole or in part on the 
credit report or insurance credit score of an applicant for 
insurance coverage or any person other than the named applicant who 
would be insured under the policy.
	(b)  This section does not apply to the use of a credit report 
or insurance 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.  The commissioner may adopt rules as 
necessary to implement this article.
	Sec. 5.  PENALTY.  An insurer who violates this article 
commits an unfair practice in violation of Article 21.21 of this 
code.
	SECTION 2.  Article 21.49-2M, Insurance Code, as added by 
this Act, applies only to an insurance policy delivered, issued for 
delivery, or renewed on or after January 1, 2004.  A policy 
delivered, issued for delivery, or renewed before January 1, 2004, 
is governed by the law as it existed immediately before the 
effective date of this Act, and that law is continued in effect for 
that purpose.
	SECTION 3.  This Act takes effect September 1, 2003.