Relating to the use of credit scoring and rating territories in writing certain lines of personal insurance.
The impact of HB 3565 on state laws is significant, primarily as it prohibits insurers from using credit information in ways that could be deemed discriminatory or unfair. Insurers will no longer be allowed to deny coverage or charge higher premiums based solely on an individual’s credit history, thus reinforcing consumer protections. This change is aimed at ensuring that consumers are not adversely affected due to their credit status, which is often an unstable measure of risk when related to future insurance losses.
House Bill 3565 aims to reform the use of credit scoring and rating territories in the underwriting processes of personal insurance policies in Texas. The bill introduces several amendments to existing sections of the Texas Insurance Code, particularly emphasizing the limitations placed on insurers regarding the consideration of credit histories when determining insurance premiums and the eligibility of applicants for coverage. By defining key terms such as 'credit report' and 'credit score,' this legislation seeks to clarify the practices involved in personal insurance underwriting.
Despite the intended protective measures for consumers, the bill has faced contention from various stakeholders. Supporters argue that the removal of credit scoring from the insurance underwriting process is essential for promoting fairness and reducing discrimination against individuals with poor credit. However, opponents contend that it may unduly restrict insurers’ ability to assess risk accurately, potentially leading to higher premiums for a broader range of consumers. The changes in rating territories furthermore raise concerns regarding how insurance premiums are calculated across different geographic regions within the state.