HOUSE BILL 442
46th legislature - STATE OF NEW MEXICO - second session, 2004
INTRODUCED BY
Daniel R. Foley
AN ACT
RELATING TO INSURANCE; ENACTING THE INSURANCE CREDIT INFORMATION ACT; REGULATING THE USE OF CREDIT INFORMATION FOR PERSONAL INSURANCE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. SHORT TITLE.--This act may be cited as the "Insurance Credit Information Act".
Section 2. APPLICATION OF ACT.--The provisions of the Insurance Credit Information Act apply to personal insurance and not to commercial insurance or any other types of insurance.
Section 3. DEFINITIONS.--As used in the Insurance Credit Information Act:
A. "adverse action" means a denial or cancellation of, an increase in any charge for or a reduction or other adverse or unfavorable change in the terms of coverage or amount of any insurance, existing or applied for, in connection with the underwriting of personal insurance;
B. "affiliate" means any company that controls, is controlled by or is under common control with another company;
C. "applicant" means an individual who has applied to be covered by a personal insurance policy with an insurer;
D. "consumer" means an insured whose credit information is used or whose insurance score is calculated in the underwriting or rating of a personal insurance policy or an applicant for such a policy;
E. "consumer reporting agency" means a person that, for monetary fees, dues or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties;
F. "credit information" means any credit-related information derived from a credit report, found on a credit report itself or provided on an application for personal insurance. Information that is not credit-related shall not be considered credit information, regardless of whether it is contained in a credit report or in an application, or is used to calculate an insurance score;
G. "credit report" means a written, oral or other communication of information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing or credit capacity that is used or expected to be used or collected in whole or in part for the purpose of serving as a factor to determine personal insurance premiums, eligibility for coverage or tier placement;
H. "insurance score" means a number or rating that is derived from an algorithm, computer application, model or other process that is based in whole or in part on credit information for the purposes of predicting the future insurance loss exposure of an individual applicant or insured; and
I. "personal insurance" means private passenger automobile, homeowners', motorcycle, mobile-homeowners', boat, personal watercraft, snowmobile, recreational vehicle and noncommercial dwelling fire insurance polices. Such policies must be individually underwritten for personal, family or household use.
Section 4. USE OF CREDIT INFORMATION--LIMITS ON USE.--An insurer authorized to do business in New Mexico that uses credit information to underwrite or rate risks shall not:
A. use an insurance score that is calculated using income, gender, address, zip code, ethnic group, religion, marital status or nationality of the consumer as a factor;
B. deny, cancel or not renew a policy of personal insurance solely on the basis of credit information without consideration of any other applicable underwriting factor independent of credit information and not expressly prohibited by law;
C. base an insured's renewal rates for personal insurance solely upon credit information without consideration of any other applicable factor independent of credit information;
D. take an adverse action against a consumer solely because he or she does not have a credit card account without consideration of any other applicable factor independent of credit information;
E. consider an absence of credit information or an inability to calculate an insurance score in underwriting or rating personal insurance unless the insurer:
(1) treats the consumer as otherwise approved by the superintendent of insurance and the insurer presents information that such an absence or inability relates to the risk for the insurer;
(2) treats the consumer as if the applicant or insured had neutral credit information, as defined by the insurer; or
(3) excludes the use of credit information as a factor and uses only other underwriting criteria;
F. take an adverse action against a consumer based on credit information unless an insurer obtains and uses a credit report issued or an insurance score calculated within ninety days from the date the policy is first written or renewal is issued;
G. use credit information unless the insurer has recalculated the insurance score or obtained an updated credit report in the last thirty-six months; or
H. use the following as a negative factor in any insurance scoring methodology or in reviewing credit information for the purpose of underwriting or rating a policy of personal insurance:
(1) credit inquiries not initiated by the consumer or inquiries requested by the consumer for the consumer's own credit information;
(2) inquiries relating to insurance coverage, if so identified on a consumer's credit report;
(3) collection accounts with a medical industry code, if so identified on the consumer's credit report; or
(4) multiple lender inquiries, if coded by the consumer reporting agency on the consumer's credit report as being from either the home mortgage industry or the automobile lending industry and made within thirty days of one another, unless only one inquiry is considered.
Section 5. USE OF CREDIT INFORMATION--ACCEPTABLE AND REQUIRED USES--EXCEPTIONS.--
A. An insurer shall have the discretion to obtain current credit information upon any renewal if consistent with its underwriting guidelines.
B. At annual renewal, upon the request of a consumer or the consumer's agent, the insurer shall re-underwrite and re-rate the policy based upon a current credit report or insurance score; provided, however, that an insurer need not recalculate the insurance score or obtain the updated credit report of a consumer more frequently than once in a twelve-month period or obtain current credit information for an insured if:
(1) the insurer is treating the consumer in accordance with rules adopted by the superintendent of insurance;
(2) the insured is in the most favorably priced tier of an insurer within a group of affiliated insurers;
(3) credit was not used for underwriting or rating the insured when the policy was initially written; or
(4) the insurer reevaluates the insured within three years of inception of the policy and thereafter based upon other underwriting or rating factors that exclude credit information.
Section 6. DISPUTE RESOLUTION AND ERROR CORRECTION.--If it is determined through the dispute resolution process set forth in the federal Fair Credit Reporting Act that the credit information of a current insured was incorrect or incomplete and if the insurer receives notice of the determination from either the consumer reporting agency or from the insured, the insurer shall re-underwrite and re-rate the consumer within thirty days of receiving the notice. After re-underwriting or re-rating the insured, the insurer shall make any adjustments necessary, consistent with its underwriting and rating guidelines. If an insurer determines that the insured has overpaid the premium, the insurer shall refund to the insured the amount of overpayment calculated back to the shorter of either the last twelve months of coverage or the actual policy period.
Section 7. INITIAL NOTIFICATION OF USE OF CREDIT INFORMATION.--
A. If an insurer writing personal insurance uses credit information in underwriting or rating a consumer, the insurer or its agent shall disclose, either on the insurance application or at the time the insurance application is taken, that it may obtain credit information in connection with the application. The disclosure shall be either written or provided to an applicant in the same medium as the application for insurance. The insurer need not provide the disclosure statement required under this section to any insured on a renewal policy if the consumer has previously been provided a disclosure statement.
B. Use of the following example disclosure statement constitutes compliance with this section: "In connection with this application for insurance, we may review your credit report or obtain or use a credit-based insurance score based on the information contained in that credit report. We may use a third party in connection with the development of your insurance score.".
Section 8. ADVERSE ACTION NOTIFICATION.--If an insurer takes an adverse action based upon credit information, the insurer shall provide notification to the consumer that an adverse action has been taken in accordance with the requirements of the federal Fair Credit Reporting Act and explain the reasons for the adverse action. The reasons shall be provided in sufficiently clear and specific language so that a person can identify the basis for the insurer's decision to take an adverse action. The notification shall include a description of up to four factors that were the primary influences of the adverse action. The use of generalized terms such as "poor credit history", "poor credit rating" or "poor insurance score" does not meet the explanation requirements of this subsection. Standardized credit explanations provided by consumer reporting agencies or other third party vendors are deemed to comply with this section.
Section 9. FILING OF INSURANCE SCORES.--
A. Insurers that use insurance scores to underwrite and rate risks shall file their scoring models or other scoring processes with the insurance division of the public regulation commission. A third party may file scoring models on behalf of insurers. A filing that includes insurance scoring may include loss experience justifying the use of credit information.
B. A filing relating to credit information is considered a trade secret pursuant to the Uniform Trade Secrets Act.
Section 10. INDEMNIFICATION.--An insurer shall indemnify, defend and hold agents harmless from and against all liability, fees and costs arising out of or relating to the actions, errors or omissions of an agent who obtains or uses credit information or insurance scores for an insurer, provided that the agent follows the instructions of or the procedures established by the insurer and complies with any applicable law or regulation. Nothing in this section shall be construed to provide a consumer or other insured with a cause of action that does not exist in the absence of this section.
Section 11. SALE OF POLICY TERM INFORMATION BY CONSUMER REPORTING AGENCY.--
A. A consumer reporting agency shall not provide or sell data or lists that include any information that in whole or in part was submitted in conjunction with an insurance inquiry about a consumer's credit information or a request for a credit report or insurance or information on the expiration dates of an insurance policy, the terms and conditions of the consumer's insurance coverage or any other information that may identify time periods during which a consumer's insurance may expire.
B. The restrictions provided in Subsection A of this section do not apply to data or lists that the consumer reporting agency supplies to the insurance agent from whom information was received, the insurer on whose behalf the agent acted or the insurer's affiliates or holding companies.
C. Nothing in this section shall be construed to restrict any insurer from being able to obtain a claims history report or a motor vehicle report.
Section 12. SEVERABILITY.--If any part or application of the Insurance Credit Information Act is held invalid due to an interpretation of or a future change in the federal Fair Credit Reporting Act, the remainder or its application to other situations or persons shall not be affected.
Section 13. APPLICABILITY.--The provisions of this act apply to personal insurance policies written to be effective or renewed on or after January 1, 2005.
Section 14. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2004.
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