The Oregon Insurance Division has adopted regulations governing insurance companies’ use of credit-based insurance scores in writing personal automobile and homeowners policies. The regulations take effect June 1.
“We are pleased that the division took action to avert potential inconsistencies,” said Sam Sorich, vice president and western regional manager of the National Association of Independent Insurers (NAII). “The restrictions contains a number of disclosure and underwriting provisions. Overall, the new rules establish fair requirements relating to insurers’ use of credit information for underwriting and rating.”
The Oregon Insurance Division accepted NAII’s suggested wording of the definition of an “adverse action,” creating a less unwieldy and more abbreviated definition.
“By incorporating the definition of ‘adverse action’ in the U.S. Fair Credit Reporting Act, rather than attempting to define the term using other language, the division will be able to eliminate some confusion for both policyholders and insurance companies,” Sorich said. “Over the course of working on the regulations with NAII and others, the division became more prescriptive in what insurers need to address in their statements of credit use. The timing and scope of the initial notice to the consumer and of the insurer’s use of credit histories are better clarified.”
Some of the most significant requirements in the regulations are:
· An insurer must notify a consumer who has requested insurance coverage that the insurer will check the consumer’s credit history.
· During the application process, the insurer must notify the consumer that the consumer may request a written statement that describes the insurer’s use of credit information.
· An insurer that uses a consumer’s credit history in connection with the renewal of the consumer’s policy must notify the consumer of the use when the insurer makes a renewal offer. The insurer must also inform the consumer that the consumer has a right annually to request that the insurer use current credit information in the renewal process.
· When an insurer takes an adverse action based on credit information—such as a non-renewal or rate adjustment—the insurer must provide the consumer with a notice that summarizes the most significant reasons for the adverse action.
· An insurer may not cancel or refuse to renew a policy on the basis of credit history or an insurance score, however, certain exceptions are provided.
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