Enrolled SB 13: Relating to using credit history or insurance scoring for insurance purposes; and providing for an effective date.
00Enrolled SB 13 01 Relating to using credit history or insurance scoring for insurance purposes; and providing for 02 an effective date. 03 _______________ 04 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 05 to read: 06 PURPOSE. It is the purpose of this Act to regulate the use of credit information for 07 personal insurance so that consumers are provided with certain protections with respect to the 08 use of credit information. This Act is not intended to apply to commercial insurance 09 transactions. 10 * Sec. 2. AS 21.36 is amended by adding a new section to read: 11 Sec. 21.36.460. Uses of and restrictions on credit history or insurance 12 scoring applicable to personal insurance. (a) If an insurer writing personal 13 insurance uses credit information in underwriting or rating a consumer, the insurer 14 shall disclose, either on the insurance application or, at the time the insurance
01 application is taken, that the insurer will obtain credit information in connection with 02 the application. The disclosure required under this subsection shall be in writing or in 03 the same medium as the application for insurance. Use of the following statement 04 constitutes compliance with this subsection: "In connection with this application for 05 insurance, we will review your credit report or obtain or use a credit-based insurance 06 score based on the information contained in your credit report. We may use this 07 information to decide whether to insure you or how much to charge." If an insurer 08 uses a third party to calculate the applicant's insurance score, the disclosure required 09 under this subsection must also contain language similar to: "We may use a third 10 party in connection with the development of your insurance score." 11 (b) An insurer that takes adverse action involving personal insurance against a 12 consumer based in whole or in part on credit history or insurance score shall provide 13 the consumer the opportunity to request reconsideration of the adverse action and 14 provide written notice to the applicant or named insured. The notice must 15 (1) clearly and specifically state the significant factors of the credit 16 history or insurance score that resulted in the adverse action, in a manner that allows 17 the consumer to identify the basis for the adverse action; 18 (2) inform the consumer that the consumer is entitled to 19 (A) request reconsideration of the adverse action; and 20 (B) a free copy of the consumer's report under 15 U.S.C. 1681 21 et seq. (Fair Credit Reporting Act); 22 (3) inform the consumer that the consumer has the right to correct 23 errors in the credit report; 24 (4) advise the consumer on ways to improve the consumer's insurance 25 score; and 26 (5) provide information to assist the consumer with the error correction 27 process. 28 (c) An insurer may use credit history to cancel, deny, underwrite, or rate 29 personal insurance only in combination with other substantive underwriting factors. 30 For the purposes of this subsection, 31 (1) refusal to offer personal insurance coverage to a consumer
01 constitutes denial of personal insurance; and 02 (2) an offer of placement with an affiliate insurer does not constitute 03 denial of coverage. 04 (d) An insurer may not 05 (1) fail to renew or, at renewal, again underwrite or rate a personal 06 insurance policy based in whole or in part on a consumer's credit history or insurance 07 score; the prohibition in this paragraph against underwriting or rating a personal 08 insurance policy at renewal may be waived by the consumer; waiver allowed under 09 this paragraph must occur at each renewal; 10 (2) cancel, deny, underwrite, or rate personal insurance coverage based 11 in whole or in part on 12 (A) the absence of credit history or the inability to determine 13 the consumer's credit history if the insurer has received accurate and complete 14 information from the consumer; this subparagraph does not apply if the insurer 15 treats the consumer as if the consumer had neutral credit information as 16 approved by the director; 17 (B) credit inquiries not initiated by the consumer; 18 (C) credit inquiries relating to insurance coverage if identified 19 on a consumer's credit report; 20 (D) credit inquiries by the consumer for the consumer's own 21 credit information; 22 (E) multiple lender inquiries if coded on the consumer's credit 23 report as being for automobile, boat, recreation vehicle, or home mortgage 24 loans, unless all inquiries under that code within a 30-day period are counted 25 as one; 26 (F) credit history or an insurance score based on collection 27 accounts identified with a medical industry code; 28 (G) the consumer's use of a particular type of credit card, 29 charge card, or debit card or the absence of a credit card; 30 (H) the consumer's total available line of credit; however, the 31 consumer's ratio of debt to total available line of credit may be considered;
01 (I) the age of the most recent automobile or home loan obtained 02 by the consumer; however, an insurer may consider the bill payment history or 03 total number of loans; or 04 (J) the person's age when credit is established; 05 (3) use the credit history of the consumer when the consumer is 06 adversely affected by a joint account owner who was the spouse of the consumer or a 07 joint account owner who is the spouse of the consumer and who is a party to a divorce 08 or dissolution action against the consumer; this paragraph applies only if the consumer 09 provides written notice to the insurer that identifies the credit information that is 10 adversely affected by the joint account owner; this paragraph does not prevent the use 11 of credit history that is not identified by the consumer as required by this paragraph; 12 (4) use an insurance score that is calculated using the income, age, sex, 13 address, zip code, census block, ethnic group, religion, marital status, or nationality of 14 the consumer as a factor; 15 (5) use credit history to determine an insurance score if the history is 16 obtained more than 90 days before the policy is issued; 17 (6) use an insurance score derived from an insurance scoring model to 18 determine eligibility for an insurance payment plan; this paragraph does not prohibit 19 the use of credit history to evaluate the ability of the consumer to make payments. 20 (e) If incorrect credit history is used to underwrite or rate personal insurance 21 coverage and a consumer is charged higher premiums or offered less favorable policy 22 terms due to the disputed credit history, the insurer shall reissue or rerate the policy 23 retroactive to the effective date of the current policy term, and the policy, as reissued 24 or rerated, shall provide premiums and policy terms the consumer would have been 25 eligible for if accurate credit history had been used to underwrite or rate the policy. If 26 an insurer determines that the insured has overpaid a premium, the insurer shall refund 27 to the insured the amount of overpayment calculated back to the last 12 months of 28 coverage or the actual policy period, whichever period is shorter. This subsection 29 applies only if the consumer discovers the incorrect credit history within 12 months 30 after the policy is issued, resolves the dispute as described under (f) of this section or 31 under the process in 15 U.S.C. 1681 et seq. (Fair Credit Reporting Act), and notifies
01 the insurer in writing that the dispute has been resolved. 02 (f) If the use of disputed credit history results in denial or cancellation of 03 personal insurance coverage, an insurer shall reunderwrite the coverage without the 04 use of credit information as a factor. This subsection applies only if, within 10 days 05 following denial or cancellation, the consumer provides a reconsideration certification 06 to the insurer that sets forth any items of the credit history that are disputed and that 07 indicates that the consumer has initiated the dispute resolution process in 15 U.S.C. 08 1681 (Fair Credit Reporting Act) by requesting a copy of the consumer's credit report. 09 An insurer's reconsideration certification form 10 (1) is subject to filing and approval by the director under 11 AS 21.42.120; and 12 (2) shall be provided by an insurer to the consumer at the time of 13 denial or cancellation. 14 (g) This section does not require an insurer to use credit history for any 15 purpose. 16 (h) An insurer shall indemnify, defend, and hold the insurer's producers 17 harmless from all liability, fees, and costs arising out of or relating to the actions, 18 errors, or omissions of an insurance producer who obtains or uses credit information 19 or insurance scores for an insurer if the insurance producer follows the instructions of 20 or procedures established by the insurer and complies with any applicable law or 21 regulation. This subsection does not provide a consumer or other insured with a cause 22 of action that does not exist in the absence of this subsection. 23 (i) In this section, 24 (1) "adverse action" has the meaning given in 15 U.S.C. 1681 et seq. 25 (Fair Credit Reporting Act) and includes 26 (A) cancellation, denial, or failure to renew personal insurance 27 coverage; 28 (B) charging a higher insurance premium for personal 29 insurance than would have been offered if the credit history or insurance score 30 had been more favorable, whether the charge is by 31 (i) application of a rating rule;
01 (ii) assignment to a rating tier that does not have the 02 lowest available rates; or 03 (iii) placement with an affiliate company that does not 04 offer the lowest rates available to the consumer within the affiliate 05 group of insurance companies; or 06 (C) any reduction or adverse or unfavorable change in the 07 terms of coverage or amount of personal insurance due to a consumer's credit 08 history or insurance score; a reduction or adverse or unfavorable change in the 09 terms of coverage occurs when 10 (i) coverage provided to the consumer is not as broad in 11 scope as coverage requested by the consumer but available to other 12 insureds of the insurer or any affiliate; or 13 (ii) the consumer is not eligible for benefits that are 14 available through affiliate insurers; 15 (2) "affiliate" has the meaning given in AS 21.22.200; 16 (3) "consumer" means an individual policyholder or applicant for 17 insurance; 18 (4) "consumer report" has the meaning given in 15 U.S.C. 1681 et seq. 19 (Fair Credit Reporting Act); 20 (5) "credit history" means written, oral, or other communication of 21 information by a consumer reporting agency bearing on a consumer's 22 creditworthiness, credit standing, or credit capacity that is used or expected to be used, 23 or collected in whole or in part, for the purpose of serving as a factor in determining 24 personal insurance premiums or eligibility for coverage; 25 (6) "insurance score" means a number or rating that is derived from an 26 algorithm, computer application, model, or other process that is based in whole or in 27 part on credit history; 28 (7) "personal insurance" means 29 (A) private passenger automobile or motorcycle coverage; 30 (B) homeowner coverage, including mobile homeowner's, 31 manufactured homeowner's, condominium owner's, and renter's coverage;
01 (C) dwelling property coverage; 02 (D) earthquake coverage for a residence or personal property; 03 (E) personal liability and theft coverage; 04 (F) personal property inland marine coverage; 05 (G) personal boat, watercraft, snowmobile, and recreational 06 vehicle coverage; and 07 (H) umbrella insurance coverage. 08 * Sec. 3. AS 21.39 is amended by adding a new section to read: 09 Sec. 21.39.035. Required filing of insurance scoring models; personal 10 insurance. (a) Credit history may not be used to determine personal insurance rates 11 or premiums or to make underwriting decisions unless the insurance scoring models 12 are filed with the director. Insurance scoring models include all attributes and factors 13 used in the calculation of an insurance score, statistical validation, documentation, 14 appropriate loss information, and any other relevant factors. 15 (b) Information filed under (a) of this section 16 (1) is confidential, shall be considered a trade secret, and is not subject 17 to public inspection under AS 21.06.060; 18 (2) may be released or otherwise shared as provided in AS 21.06.060; 19 and 20 (3) shall be filed by the insurer and may not be filed by a third party or 21 vendor. 22 (c) An insurer shall comply with AS 21.36.460 when using credit history to 23 calculate a personal insurance score or determine personal insurance premiums or 24 rates. 25 (d) Notwithstanding (b) of this section, the director shall make available to the 26 public a general description of the insurance scoring models filed under (a) of this 27 section. A general description of insurance scoring models may not disclose any trade 28 secrets contained in the models. 29 (e) In this section, 30 (1) "credit history" has the meaning given in AS 21.36.460; 31 (2) "insurance score" has the meaning given in AS 21.36.460;
01 (3) "personal insurance" has the meaning given in AS 21.36.460. 02 * Sec. 4. AS 21.36.460(g), added by sec. 2 of this Act, and AS 21.39.035(b), added by sec. 03 3 of this Act, take effect June 1, 2003. 04 * Sec. 5. Except as provided in sec. 4 of this Act, this Act takes effect January 1, 2004.