78R2634 PB-D
By: Hochberg H.B. No. 331
A BILL TO BE ENTITLED
AN ACT
relating to credit scoring in underwriting and rating certain
consumer 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 21.49-2R to read as follows:
Art. 21.49-2R. PROHIBITION ON USE OF CREDIT SCORING IN
UNDERWRITING OR RATING
Sec. 1. DEFINITIONS. In this article:
(1) "Applicant for insurance coverage" includes an
applicant for new coverage and a policyholder renewing coverage.
(2) "Consumer reporting agency" has the meaning
assigned by Section 603, Fair Credit Reporting Act (15 U.S.C.
Section 1681a), as amended.
(3) "Credit report" means a written or electronic
communication of any information by a consumer reporting agency
that bears on an individual's creditworthiness, credit standing, or
credit capacity.
(4) "Credit score" means a numerical representation of
the risk presented by an individual that uses attributes of the
individual derived from a credit report or other consumer or credit
information in a formula to assess risk on an actuarial or
statistical basis.
(5) "Credit scoring entity" means a consumer reporting
agency or other entity that creates, compiles, or provides credit
scores.
(6) "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.
(7) "Underwriting" means the selection of the risk
that will be assumed by an insurer, and specifically the decision
whether to accept, deny, renew, nonrenew, reduce, or increase the
amount of benefits payable under an insurance policy or the types of
coverages available under an insurance policy.
Sec. 2. APPLICATION. This article applies only to:
(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. PROHIBITION ON CERTAIN USE OF CREDIT SCORING BY
INSURERS. With respect to a line of insurance subject to this
article, an insurer may not:
(1) refuse to underwrite, cancel, or refuse to renew a
risk based, in whole or in part, on the credit report or credit
score of an applicant for insurance coverage; or
(2) rate a risk based, in whole or in part, on the
credit report or credit score of an applicant for insurance
coverage in any manner, including:
(A) the provision or removal of a discount;
(B) assignment of the applicant for insurance
coverage to a rating tier; or
(C) placement of an applicant for insurance
coverage with an affiliated company.
Sec. 4. CERTAIN PAYMENT PLANS. Section 3 of this article
does not prohibit an insurer from requiring a policyholder of the
insurer to make payments under a payment plan based, in whole or in
part, on the credit report of the policyholder if the insurer has
reasonable grounds, based on late payments made by the policyholder
to the insurer or other analogous circumstances related to the
relationship between the insurer and the policyholder, to justify
the implementation of a particular payment plan for that
policyholder.
Sec. 5. RULES. The commissioner may 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. Article 21.49-2R, 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.