H.734
Introduced by Representative Keenan of St. Albans City
Date:
Subject: Insurance; property and casualty insurance; discrimination
Statement of purpose: This bill proposes to prohibit unfair discrimination by insurers on the basis of credit history.
AN ACT RELATING TO THE USE OF CREDIT HISTORY BY INSURERS
It is hereby enacted by the General Assembly of the State of Vermont:
Sec. 1. 8 V.S.A. § 4724(23) is added to read:
(23) Failing to comply with the provisions of
this subdivision (23) regarding the use of credit information in insurance
underwriting and pricing.
(A) The purpose of this subdivision (23) is to
protect consumers from unfair discrimination by requiring insurers that take
adverse action using credit information to base such action only upon specific
credit events related to an individual consumer that affect the insurer’s risk
under the policy and to notify consumers of the actual reason for adverse
action.
(B) Definitions. As used in this subdivision (23):
(i) “Adverse action” means refusal to issue or
renew coverage, to limit the amount of coverage or increase the price of
coverage on a risk in this state.
Adverse action on eligibility or pricing shall include declination or
placement with a particular insurer within a group of affiliated insurers and
the use of surcharges or tier placement within an insurer.
(ii) “Credit criterion” means information bearing
on a particular aspect of an individual’s credit history.
(iii) “Credit information” shall include a
consumer report within the meaning of 15 U.S.C. § 1681a of the federal Fair
Credit Reporting Act, credit criterion and credit score.
(iv) “Credit score” means a score that is derived
by utilizing data from an individual’s credit report in an algorithm, computer
program, model, or other process that reduces the data to a number or rating.
(v) “Firm offer of insurance” shall have the
same meaning as in 15 U.S.C. § 1681a.
(vi) “Personal risk insurance” means insurance to
be used primarily for personal, family or household purposes.
(C) An insurer shall not take adverse action on
the eligibility or pricing of personal risk insurance based on a consumer’s
credit information unless:
(i) the action is based upon one or more
specific credit criteria in a consumer credit report;
(ii) the insurer can demonstrate that the credit
criterion used by the insurer increases the risk of loss to the
insurer under the policy; and
(iii) the insurer provides to the consumer any
disclosures required under subdivision (D) of this subdivision (23).
(D) The commissioner shall adopt rules on
consumer disclosures when credit information is used to take adverse action
against a consumer who is either an applicant for, or an insured under, a
policy of personal risk insurance. The
commissioner may require disclosures under this
subdivision
(23) to include, among other things, the fact that credit information was used,
the relationship between the specific credit criterion used and the adverse
action taken, and an explanation of how an individual credit score may be
improved.
(E) An insurer shall not use credit information
that is more than two years old to determine initial eligibility for personal
risk insurance. Prior to taking any
adverse action on an existing personal risk insurance policy, an insurer that
uses credit information in determining whether to take adverse action shall
obtain and use current credit information.
(F) Any process that calculates a credit score
shall assign a neutral value to any factor used in the process for which there
is no data or information about the individual consumer.
(G) An insurer shall be prohibited from
inquiring directly or indirectly about an individual’s credit history prior to
taking an application for personal risk insurance, other than a transaction
involving a firm offer of insurance.
(H) No insurer may take adverse action based
upon the fact that an applicant or insured does not possess a credit card.
(I) An insurer shall file with the department,
upon request of the commissioner, any algorithm, computer program, model, or
other process and data used to calculate a credit score to verify compliance
with this
subdivision
(23). Any filing required under this
subdivision (I) shall be a trade secret for purposes of section 317 of Title
1. Nothing in this subdivision (23)
shall prevent the commissioner from using and making public any such filing in
furtherance of any legal or regulatory action.
Section 18 of this title shall apply to the review of any filing made
under this subdivision (23).
(J) The provisions of this subdivision (23) do
not apply to the use of a consumer report or credit score by an insurer in an
insurance transaction that is not initiated by the consumer and consists of a
firm offer of insurance.