By: Veasey H.B. No. 981

A BILL TO BE ENTITLED

AN ACT

relating to the use of credit scoring in certain lines of personal insurance.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Sections 1(2), (4), and (7), Article 21.49-2U, Insurance Code, are amended to read as follows:

(2) "Agent" means a person licensed or required to be licensed as a general property and casualty insurance agent under Subchapters B, C, D, or E, Chapter 4051 [Article 21.14 of this code].

(4) "Consumer" means an individual whose credit information has been reported to or is in the possession of a consumer reporting agency or an insurer [is used or whose credit score is computed in the underwriting or rating of a personal insurance policy]. The term includes an applicant for insurance coverage.

(7) "Credit report" means any written, oral, or other communication of information by a consumer reporting agency that[:

[(A)] bears on a consumer's creditworthiness, credit standing, or credit capacity [; and

[(B) is used or expected to be used or collected in whole or in part to serve as a factor to determine personal insurance premiums, eligibility for coverage, or tier placement].

SECTION 2. Section 2, Article 21.49-2U, Insurance Code, is amended to read as follows:

Sec. 2. APPLICATION. This article applies to each [an] insurer that writes personal insurance coverage [and uses credit information or credit reports for the underwriting or rating of that coverage].

SECTION 3. Section 3, Article 21.49-2U, Insurance Code, is amended to read as follows:

Sec. 3. [PROHIBITED] USE OF CREDIT INFORMATION PROHIBITED. (a) An insurer may not:

(1) use an underwriting guideline [a credit score] that is based, in whole or in part, on the credit information, credit report, or credit score of an applicant for insurance coverage or any other person other than the applicant who would be insured under a policy of personal insurance [computed using factors that constitute unfair discrimination];

(2) refuse to underwrite [deny], cancel, or nonrenew a policy of personal insurance based, in whole or in part, [solely] on the [basis of] credit information, credit report, or credit score of an applicant for insurance coverage or any other person other than the applicant who would be insured under the policy [without consideration of any other applicable underwriting factor independent of credit information]; [or]

(3) take an action that results in an adverse effect against a consumer because the consumer does not have a credit card account;

(4) charge an applicant for insurance coverage a higher premium than otherwise would be charged based, in whole or in part, on the credit information, credit report, or credit score of the applicant or any other person other than the applicant who would be insured under a policy of personal insurance;

(5) rate a risk based, in whole or in part, on the credit information, credit report, or credit score of an applicant for insurance coverage or any other person other than the applicant who would be insured under a policy of personal insurance, including:

(A) providing or removing a discount;

(B) assigning the applicant for insurance coverage to a rating tier; or

(C) placing an applicant for insurance coverage with an affiliated company; or

(6) require a particular payment plan based, in whole or in part, on the credit information, credit report, or credit score of the applicant for insurance coverage or any other person other than the applicant who would be insured under a policy of personal insurance [without consideration of any other applicable factor independent of credit information].

(b) An insurer may not consider an absence of credit information or an inability to determine credit information for an applicant for insurance coverage or insured as a factor in underwriting or rating an insurance policy [unless the insurer:

[(1) has statistical, actuarial, or reasonable underwriting information that:

[(A) is reasonably related to actual or anticipated loss experience; and

[(B) shows that the absence of credit information could result in actual or anticipated loss differences;

[(2) treats the consumer as if the applicant for insurance coverage or insured had neutral credit information, as defined by the insurer; or

[(3) excludes the use of credit information as a factor in underwriting and uses only other underwriting criteria].

SECTION 4. Section 16, Article 21.49-2U, Insurance Code, is amended to read as follows:

Sec. 16. DUTIES OF DEPARTMENT. The department shall [:

[(1) update insurer profiles maintained on the department's Internet website to provide information to consumers stating whether or not an insurer uses credit scoring; and

[(2)] post the report required under Section 15 of this article on the department's Internet website.

SECTION 5. Sections 4-11 and Section 13, Article 21.49-2U, Insurance Code, are repealed.

SECTION 6. (a) This Act takes effect September 1, 2005, and applies only to a personal insurance policy:

(1) that is delivered, issued for delivery, or renewed on or after January 1, 2006;

(2) the application for which is submitted on or after January 1, 2006; or

(3) that is subject to determination of denial, cancellation, or nonrenewal on or after January 1, 2006.

(b) A personal insurance policy delivered, issued for delivery, or renewed before January 1, 2006, or the application for which is submitted before January 1, 2006, is governed by the law as it existed immediately before January 1, 2006, and that law is continued in effect for that purpose.