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.