Twenty-One States Introduce Bills to Ban, Restrict Use of Credit-Based Scoring

February 15, 2002

As of Feb. 12, 2002, 21 states have introduced bills that would ban or restrict the use of credit-based insurance scoring according to the National Association of Independent Insurers. On Feb. 13, the Minnesota House Insurance Committee held a hearing on this issue. Earlier this week, legislative committees in Georgia and Missouri held hearings, but did not vote on these bills.

Alaska: Two bills were introduced last week

SB 286/HB 395 Status: In Committee
Prohibits discrimination in insurance rates based on credit rating or credit scoring

Arizona: No legislative action taken last week

HB 2138 Status: In Committee
Prohibits residential property insurers from utilizing a person’s credit history to cancel or fail to renew a policy. Provides that property insurers may not use credit history to increase a policyholder’s premium or rates when renewing a policy.

HB 2386 Status: In Committee
Amends the definition of “adverse underwriting decision” to include a decision to assign a higher rate, or refuse to apply a premium discount or credit based upon an applicants credit history. Requires insurer to provide written explanation of an adverse decision if it is based on credit score.

California: No legislative action taken last week

AB 5 Status: in Senate Insurance Committee
Prohibits a private passenger auto insurer from basing a decision to issue or non-renew a policy solely on information in a credit report. The bill was passed by the Assembly last May and is now pending before the Senate Insurance Committee.

Colorado: Both bills are dead

HB1188 Status: Dead
Requires the disclosure of credit information and credit score as calculated by a credit reporting agency. Prohibits the release of credit information without the release from the consumer.

HB 1149 Status: Dead
Requires disclosure of credit information by a creditor who utilizes a credit reporting agency to a consumer when adverse action is expected to be taken against the consumer based on the report.

Georgia: The House Insurance Committee heard the bill Feb. 11, 2002, however no action was taken.

HB1115 Status: In Committee
Prohibits automobile insurers from using credit reports or credit scoring in underwriting policies.

Idaho: SB 1323 was substituted for SB 1408 last week

SB 1408 Status: In Committee
Amends law to implement a prohibition on an insurer from classifying an individual’s risk tolerance based upon his/her credit history or credit report. Prohibits cancellation and/or nonrenewal of policy based no said credit report.

SB1323 Status: Substituted for SB 1408
Regulates insurance carriers writing policies such that no insurer shall charge an inflated premium or cancel an insurance policy based exclusively on an individual’s credit history or credit rating.

Illinois: No legislative action taken last week

HB3780
Makes technical change to the insurance code dealing with the use of credit.

Indiana: Two bills passed in their respective chambers last week

SB409 Status: Passed Senate
Prohibits credit scoring in underwriting if it violates anti-discrimination provisions of the Unfair and Deceptive Act and Practice.

HB1164 Status: Passed House
Restricts the use of credit scores in underwriting and makes any violation an unfair or deceptive practice.

Kentucky: These bills were assigned to the House Banking and Insurance Committee

HB 563 Status: In Committee
Prohibits consumer reporting agencies from determining a credit risk score of a Kentucky resident and provides civil penalties for violations.

HB 564 Status: In Committee
Prohibits insurers from basing rates on insurance risk scores unless the method used is filed and approved by the Insurance Commissioner.

Maryland: No legislative action taken last week

HB 37 Status: In Committee
Imposes the termination of various practices implementing the discrimination of underwriting insurance policies based exclusively on credit history. Extends the aforementioned termination provision(s) to include certain models and systems used for underwriting rating

HB 521 Status: In Committee
Prohibits an insurer from refusing to underwrite a policy, or increase the premium on an existing policy due to the credit history of the applicant.

Minnesota: A hearing was held for HB 2363 Feb. 13, 2002.

HB 2492/SB2363 Status: In Committee
Prohibits auto and homeowners’ insurance companies from using credit scores when underwriting a policy of insurance.

Missouri: The House Insurance Committee held a hearing on HB1502 Feb. 12, 2002.

HB 1821 was introduced.
HB 1502 Status: In Committee
Prohibits use of credit report as sole factor in underwriting decisions. Requires insurers to advise applicants at time of application that credit reports will be used in making determinations. Specifies requirements for insurers taking adverse actions based on information contained in credit report.

HB 1821 Status: In Committee
Creates procedures for information that can be considered when determining underwriting decisions.

SB 981 Status: In Committee
Prohibits insurers from declining, limiting, cancelling, or nonrenewing coverage based solely on an applicant’s credit report. Also prohibits insurers from making adverse underwriting decisions based on credit reports. Provisions will apply to all policies issued beginning Jan. 1, 2003.

Oklahoma: SB 1546 was introduced last week

SB 1546 Status: In committee
Prohibits insurers from establishing or applying premium rates, increases in premium rates, cancellation of a policy or refusal to issue or renew a policy based on the credit history of the insured.

Rhode Island: No action taken last week

HB 6610 Status: In Committee
Forbids requests for credit reports in connection with applications for insurance.

South Carolina: No action taken last week
SB798 Status: In Committee
Adds creditworthiness to the list of factors insurers may not use when deciding to issue, cancel, or renew an automobile insurance policy. Prohibits the use of creditworthiness in determining auto insurance premium rates.

HB 4398 Status: In Committee
Disallows the use of “creditworthiness” in refusing to issue or renew an automobile policy to an individual, and determining an individual’s rate for an automobile policy.

HB 4458 Status: In committee
Adds investigative and credit reports used for underwriting purposes to the list of documents that must be kept in insurers’ file for at least three years after the application date. Prohibits motor vehicle insurers from refusing to issue or renew insurance based on credit scores. Also disallows use of credit scores in determining premiums.

South Dakota: The bill has been tabled in the House Commerce Committee

HB 1117 Status: Tabled in committee
Allows the director of insurance to promulgate rules and regulations that would prohibit the use of credit reports in underwriting.

Tennessee: No action taken last week

SB 2147/HB 2075 Status: In Committee
Prohibits an insurer from setting rates based on the credit history of the policyholder.

Utah: The bill passed the House Feb. 4, 2002. The legislature has recessed for the Olympics until Feb. 21.

HB 110 Status: Passed House – In Senate
Prohibits auto insurers from using credit reports when making underwriting decisions regarding an insured or potential insured.

Vermont: The bill was introduced last week

HB 734 Status: In Committee
This bill prohibits unfair discrimination by insurers on the basis of credit history

Virginia: The bill is dead

SB 272 Status: Died in committee
Prohibits an insurer or agent from setting rates for motor vehicle and homeowners’ insurance based upon credit scoring.

Washington: Bills were approved in their respective chambers last week

HB 2544 Status: Approved in committee
Limits the ability of an insurance carrier to adjust a personal insurance premium based on an individual’s credit report and credit history. The credit score should reflect the substantiated difference between risk and exposure and limits the maximum premium differential to 20 percent.

SB 6524 Status: Approved in committee
States that insurance carriers are to utilize an insured’s most favorable credit history when calculating rates.

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