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General Assembly Raised Bill No. 5372
February Session, 2020
LCO No. 1976
Referred to Committee on INSURANCE AND REAL ESTATE
Introduced by:
(INS)
AN ACT PROHIBITING INSURANCE COMPANIES F ROM USING
CREDIT HISTORY AS A FACTOR IN UNDERWRITING OR RATI NG
PRIVATE PASSENGER NO NFLEET AUTOMOBILE IN SURANCE
POLICIES.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. Subdivisions (4) to (6), inclusive, of subsection (b) of section 1
38a-686 of the general statutes are repealed and the following is 2
substituted in lieu thereof (Effective October 1, 2020): 3
(4) (A) Each rating plan for private passenger nonfleet automobile 4
insurance that includes territorial classifications shall assign a weight of 5
seventy-five per cent to individual territorial loss cost indication and 6
twenty-five per cent to the state-wide average loss cost indication. 7
(B) An insurer shall not use an applicant's or insured's credit history 8
as a factor in underwriting or rating private passenger nonfleet 9
automobile insurance. 10
(5) Each rating plan shall establish appropriate eligibility criteria for 11
determining significant risks that are to qualify under the plan. Rating 12 Raised Bill No. 5372
LCO No. 1976 2 of 6
plans that comply with the provisions of this subdivision shall be 13
deemed to produce rates that are not unfairly discriminatory. 14
(6) With respect to personal risk insurance other than private 15
passenger nonfleet automobile insurance, an insurer shall not use an 16
applicant's or insured's credit history as a factor in underwriting or 17
rating except in accordance with this subdivision. For the purposes of 18
this section, "credit history" means any credit-related information 19
derived from or found in a credit report or credit scoring program or 20
provided in an application for personal risk insurance, and "financial 21
history measurement program" means a program that uses an 22
applicant's credit history to measure such applicant's risk of loss. 23
(A) An insurer shall file with the commissioner any financial history 24
measurement program it uses to underwrite or rate risks for personal 25
risk insurance. Such filing shall (i) include a description of the program, 26
(ii) identify the characteristics used in such program from which a 27
measurement is derived, (iii) include the rules and procedures of such 28
program, and (iv) include an explanation of the impact of credit 29
information and items of public record on insurance rates over time. 30
Such program shall not unfairly discriminate among applicants or 31
produce rates that are excessive for the risk assumed. Any filing made 32
pursuant to this subparagraph shall be considered a trade secret for the 33
purposes of section 1-210. 34
(B) (i) An insurer that uses a financial history measurement program 35
shall submit to the commissioner documentation that demonstrates the 36
correlation between such program and the expected risk of loss, and 37
how such program impacts consumers (I) in urban territories, versus 38
consumers in nonurban territories, and (II) based on consumers' ages. 39
The commissioner may request the insurer to provide a financial history 40
measurement for a set of test examples that reflect various 41
characteristics. 42
(ii) An insurer that uses a financial history measurement program 43
shall disclose to each applicant for personal risk insurance, in writing, 44 Raised Bill No. 5372
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by telephone, by electronic mail or orally, at the time of application that 45
the applicant's credit history may be used in the underwriting or rating 46
of such applicant's policy, and that the applicant has the right to request, 47
in writing, that the insurer consider, during its underwriting or rating 48
process or during a review requested by such applicant of a rate quote, 49
an extraordinary life circumstance, as set forth in subparagraph (D) of 50
this subdivision, if such applicant's credit history has been adversely 51
impacted by such extraordinary life circumstance and such 52
extraordinary life circumstance occurred within three years before the 53
date of the application. In addition, such insurer shall provide to each 54
purchaser of such policy, not later than the date of issuance of such 55
policy, a written disclosure that includes: (I) The name, address, 56
telephone number and toll-free telephone number, if applicable, of the 57
insurer; (II) detailed information about how the insurer uses credit 58
information to underwrite or rate such policies; and (III) a summary of 59
consumer protections regarding the use of credit, in a form determined 60
by the commissioner. Such written disclosure shall be printed in 61
reasonably conspicuous type and be provided by the insurer 62
electronically, by mail or by hand delivery. 63
(C) (i) An insurer may use a financial history measurement program 64
to underwrite or rate risks only (I) for new personal risk insurance 65
policies, or (II) upon renewal, either at the request of an insured or if 66
such use reduces the premium for the insured in accordance with the 67
insurer's filed rates and rules. 68
(ii) An insurer shall not use the following characteristics in a financial 69
history measurement program: (I) The number of credit inquiries in an 70
applicant's or insured's credit report or credit history; (II) the applicant's 71
or insured's use of a particular type of credit card, debit card or charge 72
card; (III) the applicant's or insured's total available line of credit; (IV) 73
any disputed credit information while such dispute is under review by 74
a credit reporting company, provided such information is identified in 75
an applicant's or insured's credit report or credit history as being in 76
dispute; (V) collection accounts identified with a medical industry code 77
in the applicant's or insured's credit report or credit history; and (VI) the 78 Raised Bill No. 5372
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applicant's or insured's lack of credit history, unless the insurer treats 79
the applicant or insured as if such applicant or insured had neutral 80
credit information, as defined by the insurer. 81
(iii) A financial history measurement program shall give the same 82
weight to an applicant's or insured's purchase or financing of a specific 83
item regardless of the type of item purchased or financed. 84
(D) (i) Upon written request by an applicant, an insurer shall 85
consider, during its underwriting or rating process or during a review 86
requested by such applicant of a rate quote, an extraordinary life 87
circumstance of such applicant if such extraordinary life circumstance 88
occurred within three years before the date of application. If such 89
insurer determines that such applicant's credit history has been 90
adversely impacted by such extraordinary life circumstance, such 91
insurer shall grant a reasonable exception to such insurer's rates, rating 92
classifications or underwriting rules for such applicant. As used in this 93
subparagraph, "extraordinary life circumstance" means (I) a 94
catastrophic illness or injury, (II) divorce, (III) the death of a spouse, 95
child or parent, (IV) the involuntary loss of employment for more than 96
three consecutive months, (V) identity theft, (VI) total or other loss that 97
makes a home uninhabitable, (VII) other circumstances as may be 98
adopted in regulations by the commissioner, in accordance with chapter 99
54, or (VIII) any other circumstance an insurer may choose to recognize. 100
(ii) An insurer may require the applicant to provide reasonable, 101
independently verifiable written documentation of the extraordinary 102
life circumstance and the effect of such extraordinary life circumstance 103
on such applicant's credit report or credit history. Any such 104
documentation shall be kept confidential by the insurer. 105
(iii) If the insurer grants an exception pursuant to subparagraph (D)(i) 106
of this subdivision, the insurer shall (I) consider only credit information 107
that is not affected by the extraordinary life circumstance, or (II) treat 108
the applicant as if such applicant had neutral or better than neutral 109
credit information, as defined by the insurer. 110 Raised Bill No. 5372
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(iv) An insurer shall not be deemed to be out of compliance with any 111
provision of the general statutes or regulations adopted thereunder 112
concerning underwriting, rating or rate filing solely on the basis of the 113
granting of an exception pursuant to this subparagraph. 114
(E) (i) If an insurer takes an adverse action that is due at least in part 115
to the information contained in an applicant's or insured's credit report, 116
such insurer shall disclose to such applicant or insured: (I) That such 117
adverse action was based on the credit report of such insured or 118
applicant; (II) that such applicant or insured is entitled to a free copy of 119
such credit report and where such report can be obtained; (III) the types 120
of extraordinary life circumstances set forth in subparagraph (D) of this 121
subdivision; and (IV) the procedures for an applicant to inform the 122
insurer of an extraordinary life circumstance and to submit any required 123
documentation pursuant to subparagraph (D) of this subdivision. 124
(ii) For the purposes of this subdivision, an "adverse action" means (I) 125
the denial of coverage to an applicant or insured or the offering of 126
restricted coverage, (II) the offering of a higher rate, (III) the assignment 127
of an applicant or insured to a higher rate tier or to a higher-priced 128
company within an insurer group, or (IV) any other action that 129
adversely impacts an applicant or insured due to the financial history 130
measurement program. 131
(F) After an insurer's financial history measurement program has 132
been in effect for two years, the commissioner may require such insurer 133
to submit a report to the commissioner on the use of such program in 134
the state. Such report shall include information that demonstrates that 135
such program results in rates that are supported by the data and that are 136
not unfairly discriminatory, and an analysis of consumer complaints 137
submitted in writing or by electronic mail to the insurer resulting from 138
such insurer's use of a financial history measurement program, such that 139
is sufficient to identify the basis for the complaints and any subsequent 140
insurer action. 141 Raised Bill No. 5372
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This act shall take effect as follows and shall amend the following
sections:
Section 1 October 1, 2020 38a-686(b)(4) to (6)
Statement of Purpose:
To prohibit insurance companies from using an applicant's or insured's
credit history as a factor in underwriting or rating private passenger
nonfleet automobile insurance policies.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
underlined.]