HB 0109A 2003
1	A bill to be entitled
2	An act relating to the use of credit reports and credit
3	scores by insurers; creating s. 626.9741, F.S.; specifying
4	that the act's purpose is to regulate and limit the use of
5	credit reports and credit scores by insurers for
6	underwriting and rating purposes; specifying the types of
7	insurance to which the act applies; defining terms;
8	requiring that an insurer identify the items in a credit
9	report which resulted in an adverse decision; prohibiting
10	an insurer from making an adverse decision based solely on
11	a credit report or score or certain other factors;
12	requiring an insurer to provide a means for appeal to an
13	applicant or insured under certain circumstances;
14	prohibiting the use of a credit report or score unless the
15	Office of Insurance Regulation determines, based on a
16	filing by the insurer, that such use is valid and
17	reasonable; authorizing the Office of Insurance Regulation
18	to disapprove such filings; requiring an insurer to adhere
19	to certain laws and rules; requiring an insurer to provide
20	for an adjustment in the premium of an insured to reflect
21	an improvement in credit history; authorizing the
22	Financial Services Commission to adopt rules; providing
23	for application; providing for construction of the act in
24	pari materia with laws enacted during the 2003 Regular
25	Session of the Legislature; providing a contingent
26	effective date.
27
28	Be It Enacted by the Legislature of the State of Florida:
29
30	Section 1. Section 626.9741, Florida Statutes, is created
31	to read:
32	626.9741 Use of credit reports and credit scores by
33	insurers.--
34	(1) The purpose of this section is to regulate and limit
35	the use of credit reports and credit scores by insurers for
36	underwriting and rating purposes. This section applies only to
37	personal lines motor vehicle insurance and personal lines
38	residential insurance, which includes homeowners, mobile
39	homeowners dwelling, tenants, condominium unit owners,
40	cooperative unit owners, and similar types of insurance.
41	(2) As used in this section, the term:
42	(a) "Adverse decision" means a decision to refuse to issue
43	or renew a policy of insurance; to issue a policy with
44	exclusions or restrictions; to increase the rates or premium
45	charged for a policy of insurance; to place an insured or
46	applicant in a rating tier that does not have the lowest
47	available rates for which that insured or applicant is otherwise
48	eligible; or to place an applicant or insured with a company
49	operating under common management, control, or ownership which
50	does not offer the lowest rates available, within the affiliate
51	group of insurance companies, for which that insured or
52	applicant is otherwise eligible.
53	(b) "Credit report" means any written, oral, or other
54	communication of any information by a consumer reporting agency,
55	as defined in the federal Fair Credit Reporting Act, 15 U.S.C.
56	s. 1681, et seq., bearing on a consumer's credit worthiness,
57	credit standing, or credit capacity, which is used or expected
58	to be used or collected as a factor to establish a person's
59	eligibility for credit or insurance, or any other purpose
60	authorized pursuant to the applicable provision of such federal
61	act. A credit score alone, as calculated by a credit reporting
62	agency or by or for the insurer, may not be considered a credit
63	report.
64	(c) "Credit score" means a score, grade, or value that is
65	derived by using any or all data from a credit report in any
66	type of model, method, or program, whether electronically, in an
67	algorithm, computer software or program, or any other process,
68	for the purpose of grading or ranking credit report data.
69	(d) "Tier" means a category within a single insurer into
70	which insureds with substantially similar risk, exposure, or
71	expense factors are placed for purposes of determining rate or
72	premium.
73	(3) An insurer must inform an applicant or insured, in the
74	same medium as the application is taken, that a credit report or
75	score is being requested for underwriting or rating purposes. An
76	insurer that makes an adverse decision based, in whole or in
77	part, upon a credit report must provide at no charge, a copy of
78	the credit report to the applicant or insured or provide the
79	applicant or insured with the name, address, and telephone
80	number of the consumer reporting agency from which the insured
81	or applicant may obtain the credit report. The insurer must
82	provide notification to the consumer explaining the reasons for
83	the adverse decision. The reasons must be provided in
84	sufficiently clear and specific language so that a person can
85	identify the basis for the insurer's adverse decision. Such
86	notification shall include a description of the four primary
87	reasons, or such fewer number as existed, which were the primary
88	influences of the adverse decision. The use of generalized terms
89	such as "poor credit history," "poor credit rating," or "poor
90	insurance score" does not meet the explanation requirements of
91	this paragraph. A credit score may not be used in underwriting
92	or rating insurance unless the scoring process produces
93	information in sufficient detail to permit compliance with the
94	requirements of this subsection. It shall not be deemed an
95	adverse decision if, due to the insured's credit report or
96	credit score, the insured continues to receive a less favorable
97	rate or placement in a less favorable tier or company at the
98	time of renewal except for renewals or re-underwriting required
99	by this section.
100	(4)(a) An insurer may not request a credit report or score
101	based upon the race, color, religion, marital status, age,
102	gender, income, national origin, or place of residence of the
103	applicant or insured.
104	(b) An insurer may not make an adverse decision solely
105	because of information contained in a credit report or score
106	without consideration of any other underwriting or rating
107	factor.
108	(c) An insurer may not make an adverse decision or use a
109	credit score that could lead to such a decision if based, in
110	whole or in part, on:
111	1. The absence of, or an insufficient, credit history, in
112	which instance the insurer shall:
113	a. Treat the consumer as otherwise approved by the Office
114	of Insurance Regulation if the insurer presents information that
115	such an absence or inability is related to the risk for the
116	insurer;
117	b. Treat the consumer as if the applicant or insured had
118	neutral credit information, as defined by the insurer;
119	c. Exclude the use of credit information as a factor and
120	use only other underwriting criteria;
121	2. Collection accounts with a medical industry code, if so
122	identified on the consumer's credit report;
123	3. Place of residence; or
124	4. Any other circumstance that the Financial Services
125	Commission determines, by rule, lacks sufficient statistical
126	correlation and actuarial justification as a predictor of
127	insurance risk.
128	(d) An insurer may use the number of credit inquiries
129	requested or made regarding the applicant or insured except for:
130	1. Credit inquiries not initiated by the consumer or
131	inquiries requested by the consumer for his or her own credit
132	information.
133	2. Inquiries relating to insurance coverage, if so
134	identified on a consumer's credit report.
135	3. Collection accounts with a medical industry code, if so
136	identified on the consumer's credit report.
137	4. Multiple lender inquiries, if coded by the consumer
138	reporting agency on the consumer's credit report as being from
139	the home mortgage industry and made within 30 days of one
140	another, unless only one inquiry is considered.
141	5. Multiple lender inquiries, if coded by the consumer
142	reporting agency on the consumer's credit report as being from
143	the automobile lending industry and made within 30 days of one
144	another, unless only one inquiry is considered.
145	(e) An insurer must, upon the request of an applicant or
146	insured, provide a means of appeal for an applicant or insured
147	whose credit report or credit score is unduly influenced by a
148	dissolution of marriage, the death of a spouse, or temporary
149	loss of employment. The insurer must complete its review within
150	10 business days after the request by the applicant or insured
151	and receipt of reasonable documentation requested by the
152	insurer, and, if the insurer determines that the credit report
153	or credit score was unduly influenced by any of such factors,
154	the insurer shall treat the applicant or insured as if the
155	applicant or insured had neutral credit information or shall
156	exclude the credit information, as defined by the insurer,
157	whichever is more favorable to the applicant or insured. An
158	insurer shall not be considered out of compliance with its
159	underwriting rules or rates or forms filed with the Office of
160	Insurance Regulation or out of compliance with any other state
161	law or rule as a result of granting any exceptions pursuant to
162	this subsection.
163	(5) A rate filing that uses credit reports or credit
164	scores must comply with the requirements of s. 627.062 or s.
165	627.0651 to ensure that rates are not excessive, inadequate, or
166	unfairly discriminatory.
167	(6) An insurer that requests or uses credit reports and
168	credit scoring in its underwriting and rating methods shall
169	maintain and adhere to established written procedures that
170	reflect the restrictions set forth in the federal Fair Credit
171	Reporting Act, this section, and all rules related thereto.
172	(7)(a) An insurer shall establish procedures to review the
173	credit history of an insured who was adversely affected by the
174	use of the insured's credit history at the initial rating of the
175	policy, or at a subsequent renewal thereof. This review must be
176	performed at a minimum of once every 2 years or at the request
177	of the insured, whichever is sooner, and the insurer shall
178	adjust the premium of the insured to reflect any improvement in
179	the credit history. The procedures must provide that, with
180	respect to existing policyholders, the review of a credit report
181	will not be used by the insurer to cancel, refuse to renew, or
182	require a change in the method of payment or payment plan.
183	(b) However, as an alternative to the requirements of
184	paragraph (a), an insurer that used a credit report or credit
185	score for an insured upon inception of a policy, who will not
186	use a credit report or score for re-underwriting, shall
187	reevaluate the insured within the first 3 years after inception,
188	based on other allowable underwriting or rating factors,
189	excluding credit information if the insurer does not increase
190	the rates or premium charged to the insured based on the
191	exclusion of credit reports or credit scores.
192	(8) The commission may adopt rules to administer this
193	section. The rules may include, but need not be limited to:
194	(a) Information that must be included in filings to
195	demonstrate compliance with subsection (3).
196	(b) Statistical detail that insurers using credit reports
197	or scores under subsection (5) must retain and report annually
198	to the Office of Insurance Regulation.
199	(c) Standards that ensure that rates or premiums
200	associated with the use of a credit report or score are not
201	unfairly discriminatory, based upon race, color, religion,
202	marital status, age, gender, income, national origin, or place
203	of residence.
204	(d) Standards for review of models, methods, programs, or
205	any other process by which to grade or rank credit report data
206	and which may produce credit scores in order to ensure that the
207	insurer demonstrates that such grading, ranking, or scoring is
208	valid in predicting insurance risk of an applicant or insured.
209	Section 2. This act shall take effect January 1, 2004, and
210	shall apply to policies issued or renewed on or after that date,
211	except that this act shall not take effect unless HB 0111A or
212	substantially similar legislation is adopted in the same
213	legislative session, or an extension thereof, and becomes a law.