78R2376 PB-D

By:  Riddle                                                       H.B. No. 259



A BILL TO BE ENTITLED

AN ACT

relating to the use of certain insurance underwriting guidelines 
based on credit scores; providing penalties.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Subchapter E, Chapter 21, Insurance Code, is 
amended by adding Article 21.49-2Q to read as follows:
	Art. 21.49-2Q.  RESTRICTIONS ON USE OF CERTAIN UNDERWRITING 
GUIDELINES BASED ON CREDIT SCORING
	Sec. 1.  DEFINITIONS.  In this article:                                 
		(1)  "Credit history" means information regarding an 
individual's past history of:
			(A)  financial responsibility;                                        
			(B)  payment habits; or                                               
			(C)  creditworthiness.                                                
		(2)  "Credit score" means a score, grade, or value that 
is derived by using data from a credit history in any type of model, 
method, or program for the purpose of grading or ranking credit 
report data, whether derived electronically, from an algorithm, 
through a computer software application model or program, or 
through any other analogous process.
		(3)  "Insurer" means an insurer authorized to write 
property and casualty insurance in this state, including:
			(A)  a county mutual insurance company;                               
			(B)  a farm mutual insurance company;                                 
			(C)  a Lloyd's plan; and                                              
			(D)  a reciprocal or interinsurance exchange.                         
		(4)  "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 in this state that writes:
		(1)  a personal automobile insurance policy;                           
		(2)  a homeowners insurance policy;                                    
		(3)  a farm and ranch or farm and ranch owners insurance 
policy; or  
		(4)  a residential fire and allied lines insurance 
policy.           
	Sec. 3.  FILING WITH DEPARTMENT; APPROVAL; NOTICE.  (a)  An 
insurer shall file with the department, in the manner prescribed by 
the commissioner and accompanied by a fee set by the department in 
an amount reasonable and necessary to administer this article, any 
credit scoring model, method, or program used by the insurer in 
determining underwriting guidelines for insurance coverage subject 
to this article.  The insurer shall provide sufficient information 
in the filing to substantiate to the department the relevance of the 
model to the risks associated with the underwriting of the 
insurance.
	(b)  The model, method, or program may use any information, 
including computer programs, algorithms, and other analogous 
systems, that produce relevant statistics concerning the lines of 
insurance subject to this article.
	(c)  An insurer may not use any credit scoring model, method, 
or program until it has been filed with the department and approved 
by the commissioner.
	(d)  A filing under this section must contain all information 
and statistics relevant to the subject matter of the filing.  Not 
later than the 30th day after the date the insurer files the 
information, the commissioner shall either approve or disapprove 
the filing and give written notice of the decision to the insurer.  
A filing is considered complete when all information requested by 
the commissioner is received by the department.  If the 
commissioner disapproves a filing, the notice must specify in what 
manner the filing fails to meet the requirements of this article.  
An insurer whose filing is disapproved is entitled to a hearing on 
written request to the department made by the insurer not later than 
the 30th day after the date of issuance of the disapproval order.  A 
hearing under this section is subject to Subchapter D, Chapter 36, 
of this code.
	Sec. 4.  PUBLIC INFORMATION.  Information submitted by an 
insurer under Section 3 of this article is public information 
available to the public under Chapter 552, Government Code.
	Sec. 5.  RULES.  The commissioner shall adopt rules as 
necessary to implement this article.
	Sec. 6.  PENALTY.  An insurer who violates this article 
commits an unfair practice in violation of Article 21.21 of this 
code.
	SECTION 2.  Section 38.002, Insurance Code, is amended by 
adding Subsection (g) to read as follows:
	(g)  This section does not apply to information submitted by 
an insurer that is public information under Article 21.49-2Q.
	SECTION 3.  Article 21.49-2Q, 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 4.  This Act takes effect September 1, 2003.