BILL REQ. #:  S-0288.1 

Read first time 01/19/2005.   Referred to Committee on Financial Institutions, Housing & Consumer Protection.

     AN ACT Relating to prohibiting the use of consumer credit histories for personal insurance renewal decisions; amending RCW 48.18.545; and adding a new section to chapter 48.18 RCW.

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

Sec. 1   RCW 48.18.545 and 2002 c 360 s 1 are each amended to read as follows:
     (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) Charging a higher insurance premium for personal insurance than would have been offered if the credit history or insurance score had been more favorable, whether the charge is by:
     (A) Application of a rating rule;
     (B) Assignment to a rating tier that does not have the lowest available rates; or
     (C) Placement with an affiliate company that does not offer the lowest rates available to the consumer within the affiliate group of insurance companies; or
     (iii) Any reduction, adverse, or unfavorable change in the terms of coverage or amount of any personal insurance due to a consumer's credit history or insurance score. 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 requested by the consumer but 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 affiliate insurers.
     (b) "Affiliate" has the same meaning as defined in RCW 48.31B.005(1).
     (c) "Consumer" means an individual policyholder or applicant for insurance.
     (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;
     (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 liability and theft coverage;
     (vi) Personal inland marine coverage; and
     (vii) 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 or insurance score shall provide written notice to the applicant or named insured. The notice must state the significant factors of the credit history or insurance score that resulted in the adverse action. The insurer shall also inform the consumer that the consumer is entitled to a free copy of their consumer report under the fair credit reporting act.
     (3) An insurer shall not cancel or nonrenew personal insurance based in whole or in part on a consumer's credit history or insurance score. An offer of placement with an affiliate insurer does not constitute cancellation or nonrenewal under this section. Any use of credit history for renewal decisions by insurers violates the consumer protection act.
     (4) An insurer may use credit history to deny personal insurance only in combination with other substantive underwriting factors. For the purposes of this subsection:
     (a) "Deny" means an insurer refuses to offer insurance coverage to a consumer;
     (b) An offer of placement with an affiliate insurer does not constitute denial of coverage; and
     (c) An insurer may reject an application when coverage is not bound or cancel an insurance contract within the first sixty days after the effective date of the contract.
     (5) Insurers shall not deny personal insurance coverage based on:
     (a) The absence of credit history or the inability to determine the consumer's credit history, if the insurer has received accurate and complete information from the consumer;
     (b) The number of credit inquiries;
     (c) Credit history or an insurance score based on collection accounts identified with a medical industry code;
     (d) The initial purchase or finance of a vehicle or house that adds a new loan to the consumer's existing credit history, if evident from the consumer report; however, an insurer may consider the bill payment history of any loan, the total number of loans, or both;
     (e) The consumer's use of a particular type of credit card, charge card, or debit card; or
     (f) The consumer's total available line of credit; however, an insurer may consider the total amount of outstanding debt in relation to the total available line of credit.
     (6)(a) If disputed credit history is used to determine eligibility for coverage and a consumer is placed with an affiliate that charges higher premiums or offers less favorable policy terms:
     (i) The insurer shall reissue or rerate the policy retroactive to the effective date of the current policy term; and
     (ii) The policy, as reissued or rerated, shall provide premiums and policy terms the consumer would have been eligible for if accurate credit history had been used to determine eligibility.
     (b) This subsection only applies if the consumer resolves the dispute under the process set forth in the fair credit reporting act and notifies the insurer in writing that the dispute has been resolved.
     (7) The commissioner may adopt rules to implement this section.
     (8) This section applies to all personal insurance policies issued or renewed after January 1, 2003.

NEW SECTION.  Sec. 2   A new section is added to chapter 48.18 RCW to read as follows:
     The legislature finds that the practices covered by RCW 48.18.545(3) are matters vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. A violation of RCW 48.18.545(3) is not reasonable in relation to the development and preservation of business and is an unfair or deceptive act in trade or commerce and an unfair method of competition for the purpose of applying the consumer protection act, chapter 19.86 RCW.