2003S0010-3 11/18/02
By: Fraser, Jackson S.B. No. 130
A BILL TO BE ENTITLED
AN ACT
relating to the use of credit scoring by insurers of residential
properties and personal automobiles; providing a civil penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter B, Chapter 21, Insurance Code, is
amended by adding Article 21.21-10 to read as follows:
Art. 21.21-10. CREDIT SCORING BY INSURERS OF RESIDENTIAL
PROPERTY AND PERSONAL AUTOMOBILES; SANCTIONS
Sec. 1. DEFINITIONS. In this article:
(1) "Adverse action" has the meaning assigned by
Section 603(k), Fair Credit Reporting Act (15 U.S.C. Section
1681a(k)), as amended.
(2) "Insurance credit score" means a numerical
representation of the insurance risk an individual presents, using
the individual's attributes derived from a credit report or credit
information in a formula to assess insurance risk on an actuarial or
statistical basis. The term includes "credit score" and "insurance
score."
(3) "Insurance credit score system" means the
methodology by which an individual's insurance credit score, credit
score, or insurance score is determined.
(4) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual, farm mutual insurance company,
capital stock company, fraternal benefit society, local mutual aid
association, county mutual insurance company, association, Lloyd's
plan company, or other entity writing personal automobile insurance
or residential property insurance in this state. The term includes
an affiliate, as defined by Section 823.003(a) of this code, and the
Texas Windstorm Insurance Association created and operated under
Article 21.49 of this code.
(5) "Personal automobile insurance" means an
automobile insurance policy providing insurance coverages for the
ownership, maintenance, or use of private passenger, utility, and
miscellaneous type motor vehicles and trailers including mobile
homes and recreational trailers, and not primarily used for the
delivery of goods, materials, or services, unless such use is in
farm or ranch operations and provided that such vehicles are owned
or leased by an individual or individuals.
(6) "Residential property insurance" means insurance
against loss to real or tangible personal property at a fixed
location provided in a homeowners policy, a tenant policy, a
condominium owners policy, or a residential fire and allied lines
policy.
Sec. 2. USERS OF CREDIT INFORMATION. An insurer that uses
credit information in whole or in part in connection with a
determination regarding any of the following must comply with the
requirements of this article:
(1) whether to issue a policy;
(2) the amount and terms of coverage in the policy;
(3) the duration of the policy;
(4) the rates and fees to be charged in the policy;
(5) whether to cancel a policy; or
(6) whether to renew a policy.
Sec. 3. LIMITATION ON THE RELIANCE ON CREDIT SCORES. An
insurer may not reject an application for, cancel, or refuse to
renew a personal automobile insurance policy or a residential
property insurance policy solely on the basis of a credit score.
Sec. 4. DISPUTED OR INACCURATE CREDIT INFORMATION. (a) An
insurer may not use disputed credit information in determining a
credit score.
(b) At the request of an insured or an applicant for
insurance, an insurer shall rerun a credit check if a previous
credit check on an insured or an applicant for insurance provided
incorrect credit information and shall recalculate the credit score
if the credit information changes.
Sec. 5. LIMITED CREDIT HISTORY. An insurer may not use the
fact that a person has little or no credit history as the sole
determining factor in determining whether to issue a policy.
Sec. 6. MEDICAL COLLECTION INFORMATION. An insurer may not
use medical collection information in determining a credit score.
Sec. 7. IMPROPER USES OF CREDIT INFORMATION AND SCORING.
(a) An insurer may not use credit information that is arbitrary,
capricious, or unfairly discriminatory.
(b) An insurer may not use insurance credit scoring or an
insurance credit scoring methodology that incorporates the race,
color, religion, national origin, or gender of an insured or an
applicant for insurance.
(c) An insurer may not use insurance inquiries or
non-consumer-initiated credit inquiries as part of the insurance
credit scoring process.
Sec. 8. DISCLOSURE REQUIREMENTS. (a) An insurer shall, on
the request of an insured or an applicant for insurance, provide
specific reasons for adverse actions.
(b) An insurer shall require its agents to disclose to its
customers that credit information will be obtained and used as part
of the insurance credit scoring process.
Sec. 9. FILING OF CREDIT SCORING MODELS. An insurer that
uses insurance credit scoring in whole or in part in deciding
whether to take any action described in this article shall file with
the commissioner the insurer's insurance credit scoring models or
methodologies for residential property insurance and personal
automobile insurance.
Sec. 10. CONFIDENTIALITY OF CREDIT SCORING MODEL. A credit
scoring model filed with the commissioner for purposes of
compliance with this article is confidential trade secret
information and is not subject to disclosure under Chapter 552,
Government Code.
Sec. 11. RIGHT TO APPEAL. (a) An insurer shall reconsider
an adverse action by the insurer that has been appealed by the
insured or applicant for insurance.
(b) An appeal may be filed under this section on the basis
of:
(1) catastrophic illness or injury;
(2) temporary loss of employment;
(3) death of an immediate family member; or
(4) any other grounds as determined by the
commissioner by rule as provided by Section 12(a)(1)(C) of this
article.
(c) In considering an appeal, the insurer shall make
reasonable exceptions for credit scores that are adversely affected
by any of the factors specified in Subsection (b) of this section.
(d) An insurer shall implement a procedure for appeals that
conforms with rules for appeals adopted by the commissioner under
Section 12 of this article.
Sec. 12. RULES. (a) The commissioner shall adopt rules
governing the procedure for appeals under Section 11 of this
article, including:
(1) rules regarding:
(A) the time period in which an insured or an
applicant for insurance has the right to file an appeal;
(B) the means of notification of the appeals
process;
(C) the grounds for an appeal, which may include
additional grounds for appeal and other exceptions as determined by
the commissioner;
(D) provisions for reasonable, fair, and
nondiscriminatory means of review and determination of an appeal;
(E) the time frame for the appeals decision; and
(F) the means of notification of the appeals
decision; and
(2) any other rules the commissioner determines are
reasonable and necessary to implement the appeals process under
this section and Section 11 of this article.
(b) The commissioner shall adopt any other rules as
necessary to implement the provisions of this article.
Sec. 13. SANCTIONS. If the commissioner determines that an
insurer has violated any provision of this article, the insurer
shall be subject to the penalties provided under Chapter 82 of this
code.
SECTION 2. Not later than the 120th day after the effective
date of this Act, the commissioner of insurance shall adopt rules
governing the procedures for appeal as provided by Subsection (a),
Section 12, Article 21.21-10, Insurance Code, as added by this Act,
and any other rules as necessary to implement the provisions of this
Act as provided by Subsection (b), Section 12, Article 21.21-10,
Insurance Code, as added by this Act.
SECTION 3. An insurer that is using an insurance credit
score system on the effective date of this Act must file the
insurance credit scoring models described by Section 9, Article
21.21-10, Insurance Code, as added by this Act, with the
commissioner of insurance not later than the 120th day after the
effective date of this Act. An insurer that uses an insurance
credit score system after the effective date of this Act must file
the insurance credit scoring models with the commissioner of
insurance before they are used.
SECTION 4. (a) This Act applies only to a residential
property or personal automobile insurance policy:
(1) that is delivered, issued for delivery, or renewed
on or after the 120th day after the effective date of this Act;
(2) the application for which is submitted on or after
the 120th day after the effective date of this Act; or
(3) that is subject to determination of denial,
cancellation, or nonrenewal on or after the 120th day after the
effective date of this Act.
(b) A residential property or personal automobile insurance
policy delivered, issued for delivery, or renewed before the 120th
day after the effective date of this Act, or the application for
which is submitted before the 120th day after the effective date of
this Act, or that is subject to determination of denial,
cancellation, or nonrenewal before the 120th day after the
effective date of this Act 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 5. This Act takes effect June 1, 2003, if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for effect on that
date, this Act takes effect September 1, 2003.