PRINTER'S NO. 118

THE GENERAL ASSEMBLY OF PENNSYLVANIA


HOUSE BILL

No. 94 Session of 2007


        INTRODUCED BY YOUNGBLOOD, CRUZ, BISHOP, READSHAW, COHEN,
           BLACKWELL, JAMES, JOSEPHS AND FABRIZIO, JANUARY 30, 2007

        REFERRED TO COMMITTEE ON INSURANCE, JANUARY 30, 2007

                                     AN ACT

     1  Relating to the use of credit information by carriers of
     2     personal lines insurance.

     3     The General Assembly of the Commonwealth of Pennsylvania
     4  hereby enacts as follows:
     5  Section 1.  Short title.
     6     This act shall be known and may be cited as the Use of Credit
     7  Information in Personal Lines Insurance Underwriting Act.
     8  Section 2.  Purpose.
     9     The purpose of this act is to regulate the use of credit
    10  information for personal lines insurance so that consumers are
    11  afforded certain protections with respect to the use of credit
    12  information.
    13  Section 3.  Scope.
    14     This act is limited to personal lines insurance.
    15  Section 4.  Definitions.
    16     The following words and phrases when used in this act shall
    17  have the meanings given to them in this section unless the


     1  context clearly indicates otherwise:
     2     "Adverse action."  A denial of, an increase in any charge for
     3  or a reduction or other adverse or unfavorable change in the
     4  terms of coverage or amount of any insurance policy applied for
     5  in connection with the underwriting of personal lines insurance,
     6  including tier placement within an insurer and an affiliate.
     7     "Affiliate."  An insurer that controls, is controlled by or
     8  is under common control with another insurer.
     9     "Applicant."  A person who has applied to be covered by a
    10  personal lines insurance policy with an insurer.
    11     "Commissioner."  The Insurance Commissioner of the
    12  Commonwealth.
    13     "Consumer reporting agency."  Any person which for monetary
    14  fees, dues or on a cooperative nonprofit basis regularly engages
    15  in whole or in part in the practice of assembling or evaluating
    16  consumer credit information or other information on consumers
    17  for the purpose of furnishing reports to third parties.
    18     "Credit information."  Any credit-related information derived
    19  from a credit report, found on a credit report or provided on an
    20  application for personal lines insurance. Information that is
    21  not credit related shall not be considered credit information,
    22  regardless of whether it is contained in a credit report or in
    23  an application.
    24     "Credit report."  Information, including that obtained from a
    25  consumer reporting agency, bearing on a consumer's
    26  creditworthiness, credit standing or credit capacity, which is
    27  used or expected to be used or collected in whole or in part for
    28  the purpose of serving as a factor to determine personal lines
    29  insurance, eligibility for coverage and tier or affiliate
    30  placement.
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     1     "Department."  The Insurance Department of the Commonwealth.
     2     "Insurance score."  A number or rating, including that which
     3  is derived from an algorithm, computer application, model or
     4  other process, that is based in whole or in part on credit
     5  information.
     6     "Insurer."  Any individual, corporation, association,
     7  partnership, reciprocal exchange, interinsurer, Lloyd's insurer,
     8  or any other person engaged in writing personal lines insurance.
     9     "Personal lines insurance."  Homeowners, renters, dwelling,
    10  fire, personal property and personal auto insurance. The term
    11  shall not include title insurance, any commercial coverage or
    12  any other insurance not specifically set forth in this
    13  definition.
    14     "Policy period."  The term of any contract of insurance.
    15  Section 5.  Limitations on use of credit information.
    16     An insurer shall not:
    17         (1)  use an insurance score that is calculated using any
    18     factors prohibited by the laws of this Commonwealth;
    19         (2)  after the first 60 days, cancel a policy of personal
    20     lines insurance on the basis of credit information;
    21         (3)  nonrenew a policy of personal lines insurance on the
    22     basis of credit information;
    23         (4)  change an insured's renewal rates for personal lines
    24     insurance on the basis of credit information;
    25         (5)  take an adverse action against an applicant solely
    26     because he or she does not have any credit information;
    27         (6)  take adverse action against an applicant based on
    28     credit information unless an insurer obtains and uses a
    29     credit report and resulting insurance score calculated within
    30     60 days from the date the application for insurance is first
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     1     written; or
     2         (7)  use any inquiries into credit information or
     3     collection accounts with a medical industry code as a factor
     4     in any insurance scoring methodology or in reviewing credit
     5     information for the purpose of underwriting a policy of
     6     personal lines insurance.
     7  Section 6.  Dispute resolution and error correction.
     8     If it is determined through the dispute resolution process
     9  set forth in section 611(a)(5) of the Fair Credit Reporting Act
    10  (Public Law 91-508, 15 U.S.C. § 1681i(a)(5)) that the credit
    11  information of a current insured was incorrect or incomplete and
    12  if the insurer receives notice of such determination from either
    13  the consumer reporting agency or from the insured, the insurer
    14  shall reunderwrite the consumer within 30 days of receiving the
    15  notice. After reunderwriting the insured, the insurer shall make
    16  any adjustments necessary that are consistent with its
    17  underwriting guidelines. If an insurer determines that the
    18  insured has overpaid premium, the insurer shall refund to the
    19  insured the amount of overpayment calculated back to the shorter
    20  of either the last 12 months of coverage or the actual policy
    21  period.
    22  Section 7.  Notification and reunderwriting requirement.
    23     (a)  Disclosure.--Notwithstanding the limitations set forth
    24  in section 5, if an insurer writing personal lines insurance
    25  uses credit information in underwriting, the insurer or its
    26  agent shall disclose, either on the insurance application or at
    27  the time the insurance application is taken:
    28         (1)  that the insurer may obtain credit information in
    29     connection with such application; and
    30         (2)  if an applicant is issued a policy, that the insured
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     1     has a right to request, no more than one time per policy
     2     period, that the insurer reunderwrite the policy if there is
     3     a favorable change in the factors that were the primary
     4     influences of an adverse action, as those factors are set
     5     forth in the notification provided to the applicant pursuant
     6     to section 8.
     7     (b)  Method of disclosure.--The disclosures required under
     8  subsection (a) shall be either written or provided to an
     9  applicant in the same medium as the application for insurance.
    10     (c)  Form of disclosure.--The following disclosure or a
    11  substantially similar disclosure constitutes compliance with
    12  subsection (a)(1):
    13         In connection with this application for insurance, we may
    14         review your credit report or obtain or use a credit-based
    15         insurance score based on the information contained in
    16         that credit report or application. We may use a third
    17         party in connection with the development of your
    18         insurance score.
    19     (d)  Reunderwrite.--Upon receipt of a request received under
    20  subsection (a)(2), an insurer shall reunderwrite the policy and
    21  may consider all underwriting factors, including, but not
    22  limited to, the factors that were the primary influences of the
    23  adverse action, provided, however, if the sole factor for the
    24  adverse action was a credit report or credit information and the
    25  favorable change would result in lesser premium, the insurer
    26  shall reunderwrite the current policy and issue a new policy.
    27     (e)  Right of cancellation.--Any new policy issued under
    28  subsection (d) shall not be subject to any 60-day right of
    29  cancellation otherwise applicable to that policy.
    30  Section 8.  Adverse action notification.
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     1     If an insurer takes an adverse action based upon credit
     2  information, the insurer must meet the notice requirements of
     3  both paragraphs (1) and (2). Such insurer shall:
     4         (1)  Provide notification to the applicant that an
     5     adverse action has been taken, in accordance with the
     6     requirements of section 615(a) of the Fair Credit Reporting
     7     Act (Public Law 91-508, 15 U.S.C. § 1681m(a)) including
     8     instructions on how the applicant can obtain a copy of the
     9     complete credit report used by the insurer at the insurer's
    10     expense.
    11         (2)  Provide notification to the applicant explaining the
    12     reason for the adverse action. The reasons must be provided
    13     in sufficiently clear and specific language so that a person
    14     can identify the basis for the insurer's decision to take an
    15     adverse action. Such notification shall include a description
    16     of the factors that were the primary influences of the
    17     adverse action. The use of generalized terms such as "poor
    18     credit history," "poor credit rating" or "poor insurance
    19     score" does not meet the explanation requirements of this
    20     section. Standardized credit explanations provided by
    21     consumer reporting agencies or other third-party vendors are
    22     deemed to comply with this section.
    23  Section 9.  Violations.
    24     (a)  Investigation.--The following provisions apply to
    25  investigation:
    26         (1)  The commissioner may examine and investigate the
    27     affairs of any insurer engaged in writing personal lines
    28     insurance to determine whether such insurer has been or is
    29     engaged in any practice prohibited by this act.
    30         (2)  The department may require an insurer to provide for
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     1     examination and investigation of all documents, materials or
     2     other information relevant to the investigation, including,
     3     but not limited to, credit information, credit reports and
     4     insurance scores (and any algorithm, computer application,
     5     model or other process from which the insurance scores are
     6     derived) used by the insurer.
     7         (3)  Costs for any investigation instituted pursuant to
     8     this act shall be borne by the insurer.
     9         (4)  Any document, material or other information in the
    10     control or possession of the department which is furnished by
    11     an insurer or which is obtained by the department in an
    12     investigation pursuant to this act shall be confidential and
    13     privileged, shall not be subject to the act of June 21, 1957
    14     (P.L.390, No.212), referred to as the Right-to-Know Law,
    15     shall not be subject to subpoena and shall not be subject to
    16     discovery or admissible in evidence in any private civil
    17     action. However, the department is authorized to use the
    18     documents, materials or other information in the furtherance
    19     of any regulatory or legal action brought as a part of the
    20     department's duties.
    21     (b)  Enforcement.--The act may be enforced as follows:
    22         (1)  The department may impose a civil penalty of up to
    23     $5,000 for each violation of this act.
    24         (2)  The department may maintain an action in the name of
    25     the Commonwealth for an injunction to prohibit any activity
    26     that violates the provisions of this act.
    27         (3)  Any violation of this act shall be considered a
    28     violation of the act of July 22, 1974 (P.L.589, No.205),
    29     known as the Unfair Insurance Practices Act.
    30  Section 10.  Rules and regulations.
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     1     The department shall promulgate rules and regulations to
     2  carry out the provisions of this act.
     3  Section 11.  Effective date.
     4     This act shall take effect in 60 days.


















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