Z-1460

AN ACT Relating to using credit history for insurance purposes; adding a new section to chapter 48.30 RCW; adding a new section to chapter 48.19 RCW; creating a new section; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. A new section is added to chapter 48.30 RCW to read as follows:

UNFAIR PRACTICES‑-UNDERWRITING RESTRICTIONS THAT APPLY TO PERSONAL INSURANCE. (1) For the purposes of this section:

(a) "Adverse action" has the same meaning as defined in the fair credit reporting act, 15 U.S.C. Sec. 1681 et seq. Adverse actions include, but are not limited to:

(i) Cancellation, denial, or nonrenewal of personal insurance coverage;

(ii) Any increase in any charge for personal insurance that results in a higher premium charged or billed to a consumer. An increase in premium can occur:

(A) By application of a rating rule;

(B) By assignment to a rating tier that does not have the lowest available rates; or

(C) By placement with an affiliated company that does not offer the lowest rates available within the affiliated group of insurance companies; or

(iii) Any reduction, adverse, or unfavorable change in the terms of coverage or amount of any personal insurance. A reduction, adverse, or unfavorable change in the terms of coverage occurs when:

(A) Coverage provided to the consumer is not as broad in scope as coverage available to other insureds of the insurer or any affiliate; or

(B) The consumer is not eligible for benefits such as dividends that are available through affiliated insurers.

(b) "Affiliate" has the same meaning as defined in RCW 48.31B.005(1).

(d) "Consumer report" has the same meaning as defined in the fair credit reporting act, 15 U.S.C. Sec. 1681 et seq.

(e) "Credit history" means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's creditworthiness, 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 in determining personal insurance premiums or eligibility for coverage.

(f) "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 history.

(g) "Personal insurance" means:

(i) Private passenger automobile coverage, including motorcycle and recreational vehicle coverage;

(ii) Homeowner's coverage, including mobile homeowners, manufactured homeowners, condominium owners, and renter's coverage;

(iii) Dwelling property coverage;

(iv) Earthquake coverage for a residence or personal property;

(v) Personal umbrella coverage;

(vi) Personal liability and theft coverage;

(vii) Personal inland marine coverage;

(viii) Boat owner's coverage; and

(ix) Mechanical breakdown coverage for personal auto or home appliances.

(h) "Tier" means a category within a single insurer into which insureds with substantially like insuring, risk or exposure factors, and expense elements are placed for purposes of determining rate or premium.

(2) An insurer that takes adverse action against a consumer based in whole or in part on credit history shall provide written notice to the named insured. The notice must state the true and actual reason for the adverse action in clear and simple language. Specific reasons why the consumer does not meet underwriting standards must be provided, including the credit history elements that resulted in the adverse action. The insurer shall also inform the consumer that the consumer is entitled to a free copy of the consumer report or information and where that report or information can be obtained.

(3) An insurer shall not cancel or nonrenew personal insurance based in whole or in part on a consumer's credit history.

(4) An insurer shall not use a consumer's credit history as the principal determinant upon which a consumer is denied personal insurance coverage. Under this subsection, an insurer may reject an application where coverage is not bound or cancel an insurance contract within the first sixty days after the contract has gone into effect. Placement with an affiliated insurer does not constitute denial of coverage under this section. This subsection does not apply to the renewal or replacement of a policy.

(5) Insurers shall not take adverse action based on:

(a) The absence of credit history or the inability to determine the consumer's credit history;

(b) The number of credit inquiries;

(d) The consumer's purchase or finance of a specific item, such as a vehicle or house;

(e) The consumer's use of a particular type of credit card, charge card, or debit card;

(f) The consumer's total available line of credit;

(g) Disputed credit information, while the dispute is under review by the credit reporting agency; or

(h) Any factor that the commissioner determines results in unfair discrimination or discrimination against a protected class. This determination shall be made by rule.

(6) The commissioner may adopt rules to implement this section.

NEW SECTION. Sec. 2. A new section is added to chapter 48.19 RCW to read as follows:

MAKING OF RATES‑-PERSONAL INSURANCE. (1) For the purposes of this section:

(a) "Consumer" means an individual.

(b) "Credit history" means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's creditworthiness, 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 in determining personal insurance premiums or eligibility for coverage.

(c) "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 history.

(d) "Personal insurance" means:

(i) Private passenger automobile coverage, including motorcycle and recreational vehicle coverage;

(ii) Homeowner's coverage, including mobile homeowners, manufactured homeowners, condominium owners, and renter's coverage;

(iii) Dwelling property coverage;

(iv) Earthquake coverage for a residence or personal property;

(v) Personal umbrella coverage;

(vi) Personal liability and theft coverage;

(vii) Personal inland marine coverage;

(viii) Boat owner's coverage; and

(ix) Mechanical breakdown coverage for personal auto or home appliances.

(2) Credit history shall not be used to determine personal insurance rates, premiums, or eligibility for coverage unless the insurance scoring models are filed with the commissioner. Insurance scoring models include all attributes and factors used in the calculation of an insurance score. All information required to be filed under this subsection shall be kept confidential by the commissioner. This information shall not be made public or be subject to subpoena, other than by the commissioner and then only for the purpose of enforcement actions taken by the commissioner.

(3) Insurers shall not use the following types of credit history to calculate a personal insurance score, determine personal insurance premiums, or determine eligibility for personal insurance coverage:

(a) The absence of credit history or the inability to determine the consumer's credit history;

(b) The number of credit inquiries;

(d) The consumer's purchase or finance of a specific item, such as a vehicle or house;

(e) The consumer's use of a particular type of credit card, charge card, or debit card;

(f) The consumer's total available line of credit;

(g) Disputed credit information, while the dispute is under review by the credit reporting agency; or

(h) Any factor that the commissioner determines results in unfair discrimination or discrimination against a protected class. This determination shall be made by rule.

(4) The commissioner may adopt rules to implement this section.

(5) This section applies to all personal insurance policies issued or renewed on or after January 1, 2003.

NEW SECTION. Sec. 3. Captions used in this act are not any part of the law.

NEW SECTION. Sec. 4. This act takes effect January 1, 2003.