78R1787 PB-D
By: Flores H.B. No. 870
A BILL TO BE ENTITLED
AN ACT
relating to prohibiting the use of an individual's credit history
or credit score in underwriting or determining premiums for certain
consumer lines of insurance; 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 21.49-2Q to read as follows:
Art. 21.49-2Q. PROHIBITION ON USE OF CERTAIN CREDIT SCORING
BY INSURERS
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:
(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.
(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) "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.
(6) "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 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. PROHIBITIONS; EXEMPTION. (a) An insurer may not,
based primarily on the credit report or credit score of an applicant
for insurance coverage, charge the applicant a higher premium than
would otherwise be charged for an insurance policy that is subject
to this article. An insurer's decision to charge a higher premium
is considered to be based primarily on a credit report or credit
score of an applicant only if the weight given by the insurer to the
credit report or credit score exceeds the weight given by the
insurer to all other criteria considered in making the decision.
(b) An insurer may not use an underwriting guideline that is
based in whole or in part on the credit report or credit score of an
applicant for insurance coverage or any person other than the named
applicant who would be insured under the policy.
(c) This section does not apply to the use of a credit report
or 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 21.49-2Q, 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 3. This Act takes effect September 1, 2003.