Texas House Bill HB127

Texas 2017 - 85th Regular

• Filed: 11/14/16

Caption

Relating to the use of credit scoring in the underwriting and rating of certain insurance policies.

Impact

This bill represents a significant shift in the regulatory landscape concerning insurance underwriting, potentially influencing how insurers assess risk and set premiums. By eliminating credit scoring as a factor in insurance assessments, the bill seeks to protect consumers, particularly those who may be unfairly penalized due to their credit histories. This change could lead to more equitable insurance rates for demographics such as the elderly, young adults, and individuals with limited or no credit history, who often face higher premiums under traditional scoring systems.

Summary

House Bill 127 aims to regulate the use of credit scoring in the underwriting and rating of certain insurance policies. The bill prohibits insurers from using credit scores for any policies issued or renewed after January 1, 2018, essentially suspending credit scoring for insurance purposes. The legislation includes provisions for the establishment of a committee charged with examining the implications of credit scoring in insurance, assessing whether it should continue to influence underwriting practices, and exploring potential improvements in its application.

Contention

As discussions surrounding HB 127 unfolded, notable points of contention arose regarding the balance between consumer protection and the operational realities of the insurance industry. Proponents of the bill assert that reliance on credit scoring perpetuates discrimination and unfair pricing, while opponents within the insurance sector argue that removing this assessment tool could lead to increased risks and higher premiums for all consumers. The debate highlights the tension between ensuring fair treatment for policyholders and the need for insurers to effectively manage risk and maintain solvency.