CSHB 5(STA): "An Act relating to using credit history or insurance scoring for insurance purposes; and providing for an effective date."
00 CS FOR HOUSE BILL NO. 5(STA) 01 "An Act relating to using credit history or insurance scoring for insurance purposes; 02 and providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 21.36 is amended by adding a new section to read: 05 Sec. 21.36.460. Restrictions on credit history or insurance scoring 06 applicable to personal insurance. (a) An insurer may not use credit scoring in the 07 underwriting process applicable to personal insurance unless the insurer or the 08 insurer's agent obtains written permission from the applicant. 09 (b) An insurer that takes adverse action involving personal insurance against a 10 consumer based in whole or in part on credit history or insurance score shall provide 11 written notice to the applicant or named insured. The notice must state the significant 12 factors of the credit history or insurance score that resulted in the adverse action. The 13 insurer shall also inform the consumer that the consumer is entitled to a free copy of 14 the consumer's report under 15 U.S.C. 1681 - 1681v (Fair Credit Reporting Act).
01 (c) Except as provided in (d)(3) of this section an insurer may not cancel or 02 fail to renew personal insurance based in whole or in part on a consumer's credit 03 history or insurance score. An offer of placement with an affiliate insurer does not 04 constitute cancellation or failure to renew under this section. 05 (d) An insurer may use credit history to deny personal insurance only in 06 combination with other substantive underwriting factors. For the purposes of this 07 subsection, 08 (1) refusal to offer personal insurance coverage to a consumer 09 constitutes denial of personal insurance; 10 (2) an offer of placement with an affiliate insurer does not constitute 11 denial of coverage; and 12 (3) an insurer may reject an application when coverage is not bound or 13 cancel an insurance contract within the first 60 days after the effective date of the 14 contract. 15 (e) An insurer may not deny personal insurance coverage based in whole or in 16 part on 17 (1) the absence of credit history or the inability to determine the 18 consumer's credit history if the insurer has received accurate and complete information 19 from the consumer; 20 (2) the number of credit inquiries; 21 (3) credit history or an insurance score based on medical bills; 22 (4) the consumer's use of a particular type of credit card, charge card, 23 or debit card; or 24 (5) the consumer's total available line of credit. 25 (f) If disputed credit history is used to determine eligibility for personal 26 insurance coverage and a consumer is placed with an affiliate that charges higher 27 premiums or offers less favorable policy terms, the insurer shall reissue or rerate the 28 policy retroactive to the effective date of the current policy term and the policy, as 29 reissued or rerated, shall provide premiums and policy terms the consumer would have 30 been eligible for if accurate credit history had been used to determine eligibility. This 31 subsection only applies if the consumer resolves the dispute under the process in 15
01 U.S.C. 1681 - 1681v (Fair Credit Reporting Act) and notifies the insurer in writing 02 that the dispute has been resolved. 03 (g) In this section, 04 (1) "adverse action" has the meaning given in 15 U.S.C. 1681a (Fair 05 Credit Reporting Act) and includes 06 (A) cancellation, denial, or failure to renew personal insurance 07 coverage; 08 (B) charging a higher insurance premium for personal 09 insurance than would have been offered if the credit history or insurance score 10 had been more favorable, whether the charge is by 11 (i) application of a rating rule; 12 (ii) assignment to a rating tier that does not have the 13 lowest available rates; or 14 (iii) placement with an affiliate company that does not 15 offer the lowest rates available to the consumer within the affiliate 16 group of insurance companies; or 17 (C) any reduction or adverse or unfavorable change in the 18 terms of coverage or amount of personal insurance due to a consumer's credit 19 history or insurance score; a reduction or adverse or unfavorable change in the 20 terms of coverage occurs when 21 (i) coverage provided to the consumer is not as broad in 22 scope as coverage requested by the consumer but available to other 23 insureds of the insurer or any affiliate; or 24 (ii) the consumer is not eligible for benefits that are 25 available through affiliate insurers; 26 (2) "affiliate" has the meaning given in AS 21.22.200; 27 (3) "cancel" or "cancellation" includes a reduction in coverage below 28 the full replacement value of the item insured; 29 (4) "consumer" means an individual policyholder or applicant for 30 insurance; 31 (5) "consumer report" has the meaning given in 15 U.S.C. 1681a (Fair
01 Credit Reporting Act); 02 (6) "credit history" means written, oral, or other communication of 03 information by a consumer reporting agency bearing on a consumer's 04 creditworthiness, credit standing, or credit capacity that is used or expected to be used, 05 or collected in whole or in part, for the purpose of serving as a factor in determining 06 personal insurance premiums or eligibility for coverage; 07 (7) "insurance score" means a number or rating that is derived from an 08 algorithm, computer application, model, or other process that is based in whole or in 09 part on credit history; 10 (8) "personal insurance" means 11 (A) private passenger automobile coverage; 12 (B) homeowner coverage, including mobile homeowner's, 13 manufactured homeowner's, condominium owner's, and renter's coverage; 14 (C) dwelling property coverage; 15 (D) earthquake coverage for a residence or personal property; 16 (E) personal liability and theft coverage; 17 (F) personal inland marine coverage; 18 (G) mechanical breakdown coverage for personal auto or home 19 appliances; and 20 (H) flood insurance; 21 (9) "tier" means a category within a single insurer into which insureds 22 with substantially like insuring, risk or exposure factors, and expense elements are 23 placed for purposes of determining rate or premium. 24 * Sec. 2. AS 21.39 is amended by adding a new section to read: 25 Sec. 21.39.035. Making of rates; personal insurance. (a) Credit history 26 may not be used to determine personal insurance rates, premiums, or eligibility for 27 coverage unless the insurance scoring models are filed with the director. Insurance 28 scoring models include all attributes and factors used in the calculation of an insurance 29 score. 30 (b) Information filed under (a) of this section 31 (1) is confidential, and the information is not subject to public
01 inspection under AS 40.25.100 - 40.20.140; 02 (2) shall be considered a trade secret under AS 45.50.910; 03 (3) may be made public by the director for the sole purpose of 04 enforcement actions taken by the director; and 05 (4) may be disclosed by the insurer that files the information. 06 (c) An insurer may not use the following types of credit history to calculate a 07 personal insurance score or determine personal insurance premiums or rates: 08 (1) the absence of credit history or the inability to determine the 09 consumer's credit history unless the insurer has filed actuarial data segmented by 10 demographic factors in a manner prescribed by the director that demonstrates 11 compliance with AS 21.39.030; 12 (2) the number of credit inquiries; 13 (3) credit history or an insurance score based on medical bills; 14 (4) the consumer's use of a particular type of credit card, charge card, 15 or debit card; or 16 (5) the consumer's total available line of credit; however, an insurer 17 may consider the total amount of outstanding debt in relation to the total available line 18 of credit. 19 (d) If a consumer is charged higher premiums due to disputed credit history, 20 the insurer shall rerate the policy retroactive to the effective date of the current policy 21 term. As rerated, the consumer shall be charged the same premiums that would have 22 been charged if the accurate credit history was used to calculate an insurance score. 23 This subsection applies only if the consumer resolves the dispute under the process set 24 out in 15 U.S.C. 1681 - 1681v (Fair Credit Reporting Act) and notifies the insurer in 25 writing that the dispute has been resolved. 26 (e) In this section, 27 (1) "consumer" means an individual policyholder or applicant for 28 insurance; 29 (2) "credit history" has the meaning given in AS 21.36.460; 30 (3) "insurance score" has the meaning given in AS 21.36.460; 31 (4) "personal insurance" has the meaning given in AS 21.36.460.
01 * Sec. 3. The uncodified law of the State of Alaska is amended by adding a new section to 02 read: 03 REPORT. The director of the division of insurance shall report to the legislature by 04 January 1, 2005, on issues related to the use of credit history in personal insurance 05 underwriting and rating and the implementation of this Act. The report must include 06 (1) a review of how this Act has been implemented and how it has affected 07 consumers; and 08 (2) a review and analysis of insurance scoring that includes 09 (A) which types of consumers, based on demographic factors, benefit 10 from or are harmed by the use of credit history in personal insurance rating and 11 underwriting; 12 (B) the extent to which the use of credit history affects rates charged to 13 the consumer; and 14 (C) other issues as determined by the director. 15 * Sec. 4. This Act takes effect January 1, 2005.