CSHB 47(STA): "An Act relating to using credit rating or credit scoring for insurance purposes; and providing for an effective date."
00 CS FOR HOUSE BILL NO. 47(STA) 01 "An Act relating to using credit rating or credit scoring for insurance purposes; and 02 providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 05 to read: 06 PURPOSE. The purpose of this Act is to regulate the use of credit information for 07 personal insurance so that consumers are afforded certain protections with respect to the use 08 of credit information. 09 * Sec. 2. AS 21.36 is amended by adding a new section to read: 10 Sec. 21.36.460. Use of credit information. (a) An insurer authorized to do 11 business in this state that uses credit information to underwrite or rate risks may not 12 (1) use an insurance score that is calculated using the income, sex, 13 address, zip code, ethnic group, religion, marital status, or nationality of the consumer 14 as a factor;
01 (2) deny, cancel, or not renew a policy of personal insurance solely on 02 the basis of credit information, without consideration of any other applicable 03 underwriting factor independent of credit information; this paragraph does not 04 authorize the use of factors prohibited under (1) of this subsection; 05 (3) base an insured's renewal rates for personal insurance solely on 06 credit information, without consideration of any other applicable factor independent of 07 credit information; 08 (4) take an adverse action against a consumer solely because the 09 consumer does not have a credit card account, without consideration of any other 10 applicable factor independent of credit information; 11 (5) consider an absence of credit information or an inability to 12 calculate an insurance score in underwriting or rating personal insurance, unless the 13 insurer does one of the following: 14 (A) treats the consumer as otherwise approved by the director if 15 the insurer presents information that the absence or inability relates to the risk 16 for the insurer; 17 (B) treats the consumer as if the applicant or insured had 18 neutral credit information, as defined by the insurer; or 19 (C) excludes the use of credit information as a factor and uses 20 only other underwriting criteria; 21 (6) take an adverse action against a consumer based on credit 22 information, unless an insurer obtains and uses a credit report issued or an insurance 23 score calculated within 90 days from the date the policy is first written or renewal is 24 issued; 25 (7) use credit information unless, not later than every 36 months 26 following the last time that the insurer obtained current credit information for the 27 insured, the insurer recalculates the insurance score or obtains an updated credit 28 report; notwithstanding the requirements of this paragraph, 29 (A) at annual renewal, on the request of a consumer or the 30 consumer's agent, the insurer shall again underwrite and rate the policy based 31 on a current credit report or insurance score; an insurer is not required to
01 recalculate the insurance score or obtain the updated credit report of a 02 consumer more frequently than once in a 12-month period; 03 (B) the insurer may obtain current credit information upon any 04 renewal before the 36 months if consistent with its underwriting guidelines; 05 (C) an insurer is not required to obtain current credit 06 information for an insured under the requirements of (A) of this paragraph if 07 one of the following applies: 08 (i) the insurer is treating the consumer as otherwise 09 approved by the director; 10 (ii) the insured is in the most favorably priced tier of the 11 insurer, within a group of affiliated insurers; however, the insurer may 12 order a credit report if consistent with the insurer's underwriting 13 guidelines; 14 (iii) credit was not used for underwriting or rating the 15 insured when the policy was initially written; however, the insurer may 16 use credit for underwriting or rating the insured upon renewal if 17 consistent with its underwriting guidelines; or 18 (iv) the insurer reevaluates the insured beginning not 19 later than 36 months after inception and thereafter based on other 20 underwriting or rating factors, excluding credit information; 21 (8) use the following as a negative factor in insurance scoring 22 methodology or in reviewing credit information for the purpose of underwriting or 23 rating a policy of personal insurance: 24 (A) credit inquiries not initiated by the consumer or inquiries 25 requested by the consumer for the consumer's own credit information; 26 (B) inquiries relating to insurance coverage if identified as an 27 insurance coverage inquiry on a consumer's credit report; 28 (C) collection accounts with a medical industry code if 29 identified as a medical collection account on the consumer's credit report; 30 (D) multiple lender inquiries if coded by the consumer 31 reporting agency on the consumer's credit report as being from the home
01 mortgage industry and made within 30 days of one another, unless only one 02 inquiry is considered; or 03 (E) multiple lender inquiries if coded by the consumer 04 reporting agency on the consumer's credit report as being from the automobile 05 lending industry and made within 30 days of one another, unless only one 06 inquiry is considered. 07 (b) If it is determined through the dispute resolution process established under 08 15 U.S.C. 1681i(a)(5) (Fair Credit Reporting Act) that the credit information of a 09 current insured was incorrect or incomplete and if the insurer receives notice of the 10 determination from the consumer reporting agency or the insured, the insurer shall 11 again underwrite and rate the consumer within 30 days after receiving the notice. 12 After again underwriting or rating the insured, the insurer shall make any adjustments 13 necessary, consistent with the insurer's underwriting and rating guidelines. If an 14 insurer determines that the insured has overpaid a premium, the insurer shall refund to 15 the insured the amount of overpayment calculated back to the last 12 months of 16 coverage or the actual policy period, whichever period is shorter. 17 (c) If an insurer writing personal insurance uses credit information in 18 underwriting or rating a consumer, the insurer or its agent shall disclose, on the 19 insurance application or at the time the insurance application is taken, that it may 20 obtain credit information in connection with the application. A disclosure shall be 21 written or provided to an applicant in the same medium as the application for 22 insurance. The insurer is not required to provide the disclosure statement required 23 under this subsection to an insured on a renewal policy if the consumer has previously 24 received a disclosure statement. An insurer's use of the following example disclosure 25 statement constitutes compliance with this subsection: "In connection with this 26 application for insurance, we may review your credit report or obtain or use a credit- 27 based insurance score based on the information contained in that credit report. We 28 may use a third party in connection with the development of your insurance score." 29 (d) If an insurer takes an adverse action based on credit information, the 30 insurer shall provide the notice as required in this subsection. The insurer shall 31 provide notice to the consumer
01 (1) as required under 15 U.S.C. 1681m(a) (Fair Credit Reporting Act) 02 that an adverse action has been taken; and 03 (2) explaining the reason for the adverse action; the reason must be 04 provided in sufficiently clear and specific language so that a person can identify the 05 basis for the insurer's decision to take an adverse action; the notification must include 06 a description of up to four factors that were the primary influences of the adverse 07 action; the use of generalized terms such as "poor credit history," "poor credit rating," 08 or "poor insurance score" does not meet the explanation requirements of this 09 paragraph; standardized credit explanations provided by consumer reporting agencies 10 or other third-party vendors are presumed to comply with this paragraph. 11 (e) An insurer shall indemnify, defend, and hold the insurer's agents harmless 12 from all liability, fees, and costs arising out of or relating to the actions, errors, or 13 omissions of an agent who obtains or uses credit information or insurance scores for 14 an insurer if the agent follows the instructions of or procedures established by the 15 insurer and complies with any applicable law or regulation. This subsection does not 16 provide a consumer or other insured with a cause of action that does not exist in the 17 absence of this subsection. 18 (f) A consumer reporting agency may not provide or sell data or lists that 19 include information that, in whole or in part, was submitted in conjunction with an 20 insurance inquiry about a consumer's credit information or a request for a credit report 21 or insurance score. The restrictions provided in this subsection do not apply to data or 22 lists the consumer reporting agency supplies to an insurance agent from whom 23 information was received, an insurer on whose behalf the agent acted, or an insurer's 24 affiliates or holding companies. Nothing in this subsection shall be construed to 25 restrict an insurer from being able to obtain a claims history report or a motor vehicle 26 report. In this subsection, "information" includes the expiration dates of an insurance 27 policy or any other information that may identify time periods during which a 28 consumer's insurance may expire and the terms and conditions of the consumer's 29 insurance coverage. 30 (g) In this section, 31 (1) "adverse action" means a denial or cancellation of, an increase in a
01 charge for, or a reduction or other adverse or unfavorable change in the terms of 02 coverage or amount of insurance, existing or applied for, in connection with the 03 underwriting of personal insurance; 04 (2) "affiliate" means a company that controls, is controlled by, or is 05 under common control with another company; 06 (3) "applicant" means an individual who has applied to be covered by a 07 personal insurance policy with an insurer; 08 (4) "consumer" means 09 (A) an insured whose credit information is used or whose 10 insurance score is calculated in the underwriting or rating of a personal 11 insurance policy; or 12 (B) an applicant for a personal insurance policy; 13 (5) "consumer reporting agency" means a person that, for monetary 14 fees, dues, or on a cooperative nonprofit basis, regularly engages, in whole or in part, 15 in the practice of assembling or evaluating consumer credit information or other 16 information on consumers for the purpose of furnishing consumer reports to third 17 parties; 18 (6) "credit information" means credit-related information derived from 19 a credit report, found on a credit report, or provided on an application for personal 20 insurance; information that is not credit-related may not be considered "credit 21 information," regardless of whether it is contained in a credit report or in an 22 application or is used to calculate an insurance score; 23 (7) "credit report" means a written, oral, or other communication of 24 information by a consumer reporting agency bearing on a consumer's credit 25 worthiness, credit standing, or credit capacity that is used or expected to be used or 26 collected, in whole or in part, for the purpose of serving as a factor in determining 27 personal insurance premiums, eligibility for coverage, or tier placement; 28 (8) "insurance score" means a number or rating that is derived from an 29 algorithm, computer application, model, or other process that is based, in whole or in 30 part, on credit information for the purposes of predicting the future insurance loss 31 exposure of an individual applicant or insured;
01 (9) "personal insurance" means 02 (A) private passenger automobile coverage; 03 (B) homeowner coverage, including mobile homeowner's, 04 manufactured homeowner's, condominium owner's, and renter's coverage; 05 (C) noncommercial dwelling property coverage; 06 (D) earthquake coverage for a residence or personal property; 07 (E) personal liability and theft coverage; 08 (F) personal inland marine coverage; 09 (G) mechanical breakdown coverage for personal auto or home 10 appliances; and 11 (H) boat, personal watercraft, snowmobile, and recreational 12 vehicle coverage. 13 * Sec. 3. AS 21.39 is amended by adding a new section to read: 14 Sec. 21.39.035. Making of rates; personal insurance. (a) Credit 15 information may not be used to determine personal insurance rates, premiums, or 16 eligibility for coverage unless the insurance scoring models or scoring processes are 17 filed with the director. Insurance scoring models include all attributes and factors 18 used in the calculation of an insurance score. 19 (b) Information filed under (a) of this section 20 (1) is confidential, and the information is not subject to public 21 inspection under AS 40.25.100 - 40.20.140; 22 (2) shall be considered a trade secret under AS 45.50.910; and 23 (3) may be made public by the director for the sole purpose of 24 enforcement actions taken by the director. 25 (c) In this section, 26 (1) "credit information" has the meaning given in AS 21.36.460; 27 (2) "insurance score" has the meaning given in AS 21.36.460; 28 (3) "personal insurance" has the meaning given in AS 21.36.460. 29 * Sec. 4. Section 3 of this Act takes effect immediately under AS 01.10.070(c). 30 * Sec. 5. Except as provided in sec. 4 of this Act, this Act takes effect January 1, 2004.