Washington State
House of Representatives
Office of Program Research
BILL
ANALYSIS

Insurance, Financial Services & Consumer Protection Committee

HB 2802


This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Description: Prohibiting the use of personal credit histories and credit scores.

Sponsors: Representatives Chase, Hasegawa, Appleton, Kirby, Eickmeyer, Haigh, Wood and Ormsby.

Brief Summary of Bill
  • Prohibits an insurer from using an insurance score or credit history as a factor in any underwriting, renewal cancellation, or premium decision in personal insurance.

Hearing Date: 1/30/08

Staff: Jon Hedegard (786-7127).

Background:

An insurance score is a number generated via a computer program that analyzes the data in an individual's credit report. The computer program uses an algorithm to reduce credit report data to a single numerical score. Generally, insurance scores are calculated either by insurers using their own computer model or by third-party vendors who contract with insurers to do insurance score calculations. In 2002 Washington State passed a law limiting the ways in which a credit history or an insurance score can be used by insurers in underwriting and rating personal insurance.

Insurance scoring models.
Insurers may use credit history to determine premiums, rates, or eligibility for coverage unless the insurers has filed the insurance scoring models with the Insurance Commissioner.

Credit information that may not be used by insurers.
There are certain types of credit history information that an insurer can not consider in rate setting or use to deny coverage, including:

Applicants.
An insurer is permitted to consider credit history in the evaluation of a new customer applying for insurance. Credit history must be considered with other substantive underwriting factors. An offer of placement with an affiliate insurer does not constitute a denial of coverage.

Cancellation and non renewal.
An insurer's decision to cancel or not renew an existing policy of personal insurance may not be based on an insured's credit history. However, an insurer may use credit history as the basis for placing an insured with another company affiliated with the insurer.

Notice to the consumer.
An insurer that takes any adverse action against a consumer based on credit history must provide the consumer with written notice. The notice must identify those aspects of the consumer's credit history that played a significant role in the decision leading to the adverse action. The insurer must also inform the consumer that the consumer is entitled to a free copy of his or her credit report. An insured is provided with certain remedies if his or her insurance coverage is adversely affected by an inaccurate credit history.

Summary of Bill:

Insurers may not use a credit scores or credit history as a factor in any underwriting, renewal cancellation, or premium decision in personal insurance.

Appropriation: None.

Fiscal Note: Requested on January 25, 2008.

Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.