THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY YOUNGBLOOD, CRUZ, BROWN, BISHOP, KORTZ, MOUL, SEIP, SIPTROTH, K. SMITH AND CREIGHTON, FEBRUARY 13, 2009

REFERRED TO COMMITTEE ON INSURANCE, FEBRUARY 13, 2009  

AN ACT

Relating to the use of credit information by carriers of

personal lines insurance.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the Use of Credit

Information in Personal Lines Insurance Underwriting Act.

Section 2.  Purpose.

The purpose of this act is to regulate the use of credit

information for personal lines insurance so that consumers are

afforded certain protections with respect to the use of credit

information.

Section 3.  Scope.

This act is limited to personal lines insurance.

Section 4.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Adverse action."  A denial of, an increase in any charge for

or a reduction or other adverse or unfavorable change in the

terms of coverage or amount of any insurance policy applied for

in connection with the underwriting of personal lines insurance,

including tier placement within an insurer and an affiliate.

"Affiliate."  An insurer that controls, is controlled by or

is under common control with another insurer.

"Applicant."  A person who has applied to be covered by a

personal lines insurance policy with an insurer.

"Commissioner."  The Insurance Commissioner of the

Commonwealth.

"Consumer reporting agency."  Any person which for monetary

fees or dues or on a cooperative nonprofit basis regularly

engages in whole or in part in the practice of assembling or

evaluating consumer credit information or other information on

consumers for the purpose of furnishing reports to third

parties.

"Credit information."  Any credit-related information derived

from a credit report, found on a credit report or provided on an

application for personal lines insurance. Information that is

not credit related shall not be considered credit information,

regardless of whether it is contained in a credit report or in

an application.

"Credit report."  Information, including that obtained from a

consumer reporting agency, bearing on a consumer's

creditworthiness, credit standing or credit capacity, which is

used or expected to be used or collected in whole or in part for

the purpose of serving as a factor to determine personal lines

insurance, eligibility for coverage and tier or affiliate

placement.

"Department."  The Insurance Department of the Commonwealth.

"Insurance score."  A number or rating, including that which

is derived from an algorithm, computer application, model or

other process, that is based in whole or in part on credit

information.

"Insurer."  Any individual, corporation, association,

partnership, reciprocal exchange, interinsurer, Lloyd's insurer,

or any other person engaged in writing personal lines insurance.

"Personal lines insurance."  Homeowners, renters, dwelling,

fire, personal property and personal auto insurance. The term

shall not include title insurance, any commercial coverage or

any other insurance not specifically set forth in this

definition.

"Policy period."  The term of any contract of insurance.

Section 5.  Limitations on use of credit information.

An insurer shall not:

(1)  use an insurance score that is calculated using any

factors prohibited by the laws of this Commonwealth;

(2)  after the first 60 days, cancel a policy of personal

lines insurance on the basis of credit information;

(3)  nonrenew a policy of personal lines insurance on the

basis of credit information;

(4)  change an insured's renewal rates for personal lines

insurance on the basis of credit information;

(5)  take an adverse action against an applicant solely

because he or she does not have any credit information;

(6)  take adverse action against an applicant based on

credit information unless an insurer obtains and uses a

credit report and resulting insurance score calculated within

60 days from the date the application for insurance is first

written; or

(7)  use any inquiries into credit information or

collection accounts with a medical industry code as a factor

in any insurance scoring methodology or in reviewing credit

information for the purpose of underwriting a policy of

personal lines insurance.

Section 6.  Dispute resolution and error correction.

If it is determined through the dispute resolution process

set forth in section 611(a)(5) of the Fair Credit Reporting Act

(Public Law 91-508, 15 U.S.C. § 1681i(a)(5)) that the credit

information of a current insured was incorrect or incomplete and

if the insurer receives notice of such determination from either

the consumer reporting agency or from the insured, the insurer

shall reunderwrite the consumer within 30 days of receiving the

notice. After reunderwriting the insured, the insurer shall make

any adjustments necessary that are consistent with its

underwriting guidelines. If an insurer determines that the

insured has overpaid premium, the insurer shall refund to the

insured the amount of overpayment calculated back to the shorter

of either the last 12 months of coverage or the actual policy

period.

Section 7.  Notification and reunderwriting requirement.

(a)  Disclosure.--Notwithstanding the limitations set forth

in section 5, if an insurer writing personal lines insurance

uses credit information in underwriting, the insurer or its

agent shall disclose, either on the insurance application or at

the time the insurance application is taken:

(1)  that the insurer may obtain credit information in

connection with such application; and

(2)  if an applicant is issued a policy, that the insured

has a right to request, no more than one time per policy

period, that the insurer reunderwrite the policy if there is

a favorable change in the factors that were the primary

influences of an adverse action, as those factors are set

forth in the notification provided to the applicant pursuant

to section 8.

(b)  Method of disclosure.--The disclosures required under

subsection (a) shall be either written or provided to an

applicant in the same medium as the application for insurance.

(c)  Form of disclosure.--The following disclosure or a

substantially similar disclosure constitutes compliance with

subsection (a)(1):

In connection with this application for insurance, we may

review your credit report or obtain or use a credit-based

insurance score based on the information contained in

that credit report or application. We may use a third

party in connection with the development of your

insurance score.

(d)  Reunderwrite.--Upon receipt of a request received under

subsection (a)(2), an insurer shall reunderwrite the policy and

may consider all underwriting factors, including, but not

limited to, the factors that were the primary influences of the

adverse action, provided, however, if the sole factor for the

adverse action was a credit report or credit information and the

favorable change would result in lesser premium, the insurer

shall reunderwrite the current policy and issue a new policy.

(e)  Right of cancellation.--Any new policy issued under

subsection (d) shall not be subject to any 60-day right of

cancellation otherwise applicable to that policy.

Section 8.  Adverse action notification.

If an insurer takes an adverse action based upon credit

information, the insurer must meet the notice requirements of

both paragraphs (1) and (2). Such insurer shall:

(1)  Provide notification to the applicant that an

adverse action has been taken, in accordance with the

requirements of section 615(a) of the Fair Credit Reporting

Act (Public Law 91-508, 15 U.S.C. § 1681m(a)) including

instructions on how the applicant can obtain a copy of the

complete credit report used by the insurer at the insurer's

expense.

(2)  Provide notification to the applicant explaining the

reason for the adverse action. The reasons must be provided

in sufficiently clear and specific language so that a person

can identify the basis for the insurer's decision to take an

adverse action. Such notification shall include a description

of the factors that were the primary influences of the

adverse action. The use of generalized terms such as "poor

credit history," "poor credit rating" or "poor insurance

score" does not meet the explanation requirements of this

section. Standardized credit explanations provided by

consumer reporting agencies or other third-party vendors are

deemed to comply with this section.

Section 9.  Violations.

(a)  Investigation.--The following provisions apply to

investigation:

(1)  The commissioner may examine and investigate the

affairs of any insurer engaged in writing personal lines

insurance to determine whether such insurer has been or is

engaged in any practice prohibited by this act.

(2)  The department may require an insurer to provide for

examination and investigation of all documents, materials or

other information relevant to the investigation, including,

but not limited to, credit information, credit reports and

insurance scores (and any algorithm, computer application,

model or other process from which the insurance scores are

derived) used by the insurer.

(3)  Costs for any investigation instituted pursuant to

this act shall be borne by the insurer.

(4)  Any document, material or other information in the

control or possession of the department which is furnished by

an insurer or which is obtained by the department in an

investigation pursuant to this act shall be confidential and

privileged, shall not be subject to the act of February 14,

2008 (P.L.6, No.3), known as the Right-to-Know Law, shall not

be subject to subpoena and shall not be subject to discovery

or admissible in evidence in any private civil action.

However, the department is authorized to use the documents,

materials or other information in the furtherance of any

regulatory or legal action brought as a part of the

department's duties.

(b)  Enforcement.--The act may be enforced as follows:

(1)  The department may impose a civil penalty of up to

$5,000 for each violation of this act.

(2)  The department may maintain an action in the name of

the Commonwealth for an injunction to prohibit any activity

that violates the provisions of this act.

(3)  Any violation of this act shall be considered a

violation of the act of July 22, 1974 (P.L.589, No.205),

known as the Unfair Insurance Practices Act.

Section 10.  Rules and regulations.

The department shall promulgate rules and regulations to

carry out the provisions of this act.

Section 11.  Effective date.

This act shall take effect in 60 days.