80R2349 KCR-D

By: Hilderbran H.B. No. 3331

A BILL TO BE ENTITLED

AN ACT

relating to the use of credit scoring in certain lines of personal insurance and to the contents of consumer credit reports.

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

SECTION 1. Sections 559.001(4), (7), and (8), Insurance Code, are amended to read as follows:

(4) "Consumer" means an individual whose credit information has been reported to or is in the possession of a consumer reporting agency or 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].

(8) "Credit score" or "insurance score" means a number or rating derived from an algorithm, computer application, model, or other process that is[:

[(A)] based on credit information[; and

[(B) used to predict the future insurance loss exposure of a consumer].

SECTION 2. Section 559.002, Insurance Code, is amended to read as follows:

Sec. 559.002. APPLICABILITY OF CHAPTER. This chapter 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 559.003, Insurance Code, is amended to read as follows:

Sec. 559.003. INFORMATION PROVIDED TO PUBLIC. 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 former Section 15, Article 21.49-2U, on the department's Internet website.

SECTION 4. Section 559.052, Insurance Code, is amended to read as follows:

Sec. 559.052. [PROHIBITED] USE OF CREDIT INFORMATION PROHIBITED. (a) An insurer may not:

(1) use an underwriting guideline [a credit score] that is based wholly or partly on the credit information, credit report, or credit score of an applicant for insurance coverage or of any other person [computed using factors that constitute unfair discrimination];

(2) refuse to underwrite [deny], cancel, or nonrenew a policy of personal insurance based wholly or partly [solely] on the [basis of] credit information, credit report, or credit score of an applicant for insurance coverage or of any other person [without considering 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 wholly or partly on the credit information, credit report, or credit score of the applicant or of any other person;

(5) rate a risk based wholly or partly on the credit information, credit report, or credit score of an applicant for insurance coverage or of any other person, 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 wholly or partly on the credit information, credit report, or credit score of the applicant for insurance coverage or of any other person [without considering 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 for an 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 5. Subchapter B, Chapter 559, Insurance Code, is amended by adding Section 559.058 to read as follows:

Sec. 559.058. RE-UNDERWRITING AND RE-RATING REQUIRED. If an insurer used an insured's credit score or reviewed an insured's credit information or credit report in initially rating or underwriting a personal insurance policy covering the insured, the insurer, each time the policy is renewed, shall re-underwrite and re-rate the policy if re-underwriting and re-rating the policy would result in the insured's paying a lower premium for the policy than at the time the policy was first underwritten or rated.

SECTION 6. Section 20.02(a), Business & Commerce Code, is amended to read as follows:

(a) A consumer reporting agency may furnish a consumer report only:

(1) in response to a court order issued by a court with proper jurisdiction;

(2) in accordance with the written instructions of the consumer to whom the report relates; or

(3) to a person the agency has reason to believe:

(A) intends to use the information in connection with a transaction involving the extension of credit to, or review or collection of an account of, the consumer to whom the report relates;

(B) intends to use the information for employment purposes as authorized under the Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.), as amended, and regulations adopted under that Act;

(C) intends to use the information, if the use of the information is not prohibited by Chapter 559, Insurance Code, in connection with the underwriting of insurance involving the consumer as authorized under the Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.), as amended, and regulations adopted under that Act;

(D) intends to use the information in connection with a determination of the consumer's eligibility for a license or other benefit granted by a governmental entity required by law to consider an applicant's financial responsibility or status;

(E) has a legitimate business need for the information in connection with a business transaction involving the consumer; or

(F) intends to use the information for any purpose authorized under the Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.), as amended, and regulations adopted under that Act.

SECTION 7. Chapter 20, Business & Commerce Code, is amended by adding Section 20.14 to read as follows:

Sec. 20.14. INCLUDING CERTAIN INFORMATION IN REPORT PROHIBITED. A consumer reporting agency may not include in any consumer report delivered in this state information concerning an inquiry made by an insurer into a consumer's creditworthiness, credit standing, or credit capacity. For purposes of this section, "insurer" has the meaning assigned by Section 559.001, Insurance Code.

SECTION 8. The following laws are repealed:

(1) Sections 559.004(b), 559.051, and 559.053 through 559.056, Insurance Code; and

(2) Subchapters C and D, Chapter 559, Insurance Code.

SECTION 9. (a) The changes in law made by this Act in amending Chapter 559, Insurance Code, apply only to a personal insurance policy:

(1) that is delivered, issued for delivery, or renewed on or after January 1, 2008;

(2) the application for which is submitted on or after January 1, 2008; or

(3) that is subject to determination of denial, cancellation, or nonrenewal on or after January 1, 2008.

(b) A personal insurance policy delivered, issued for delivery, or renewed before January 1, 2008, or the application for which is submitted before January 1, 2008, is governed by the law as it existed immediately before January 1, 2008, and that law is continued in effect for that purpose.

(c) The change in law made by Section 20.14, Business & Commerce Code, as added by this Act, applies only to a consumer report that is requested on or after the effective date of this Act. A consumer report that is requested before the effective date of this Act is covered by the law in effect at the time the consumer report was requested, and that law is continued in effect for that purpose.

SECTION 10. This Act takes effect September 1, 2007.