July 9, 2003
Of the 19 states that enacted new laws in 2003 dealing with credit-based
insurance scores, legislators in 13 states elected to follow the provisions of
the model act developed by the
National
Conference of Insurance Legislators (NCOIL). The NCOIL model establishes
reasonable regulation for the use of such scores in underwriting and rating.
Key provisions of the NCOIL model include:
—A requirement that insurers re-underwrite and re-rate policyholders whose
credit reports were corrected;
—A requirement that insurers notify applicants that credit information will be
used in underwriting and rating;
—A requirement that insurers notify consumers in the event of an adverse action
based on credit information, including notification of up to four factors that
were the primary influences on the adverse action;
—A restriction on consumer reporting agencies' ability to provide or sell
information submitted in conjunction with an insurance inquiry; and
—A requirement that insurers file their credit scoring models with the state
Department of Insurance and have them considered a trade secret.
Four other states enacted laws that are less restrictive than the NCOIL model.
Only two states—Virginia and Alaska—implemented statutes that are slightly more
restrictive than NCOIL. The new Virginia law requires that credit information
can only be used if it is derived within 90 days for new policies and within 120
days for renewals.
The Alaska statute prohibits certain factors, such as credit history affected by
a joint account with a former spouse and credit history obtained more than 90
days before a policy is issued, from being used to calculate an insurance score.
Legislation is still pending in five states—California, Oregon, Wisconsin,
Michigan, and Pennsylvania. California's Assembly Insurance Committee will
conduct a hearing July 9 on a bill (SB 691) to ban the use of insurance scores
in underwriting and rating homeowners insurance.
The bill must pass the full Assembly by July 11 or it will be held over until
2004. In 2002, Maryland enacted a ban on the use of insurance scores to
underwrite and rate homeowners policies and since enactment many consumers with
good scores have seen a significant premium increase.
URL:
www.insurancejournal.com/news/newswire/national/2003/07/09/30479.htm