Press Release

Florida Insurance Commissioner Targets Insurers' Credit Report Use

09/03/96

Insurance Commissioner Nelson Cracks Down On Use Of Credit Reports By
Insurers


TALLAHASSEE, Fla., Aug. 29 -- Florida Treasurer and
Insurance Commissioner Bill Nelson today announced completion of the
first step in an effort to assure that credit checks aren't improperly
used by companies to discriminate or reject home or auto insurance
consumers.

The approval of a new rule by Nelson to force insurance companies for
the first time to disclose their use of credit reports comes as part
of an ongoing effort to make sure there are sufficient reliability and
confidentiality safeguards for consumers.

On Wednesday, Nelson approved a rule that basically does two things:
it requires insurers to tell consumers when they're running credit
checks. And, it requires companies to keep records of credit report
use for state regulators to monitor. The rule is scheduled to take
effect Sept. 24.

"It's important that insurance applicants not be rejected due to
erroneous or flawed credit reports," Nelson said.  "But more
importantly, we must monitor the use of credit reports to make sure
companies don't unfairly discriminate against applicants."

Some consumer groups and recent news reports have suggested the use of
credit reports is just another way for insurers to "cherry pick"
customers, while discriminating against African Americans. An
investigation last year by the National Fair Housing Alliance found
evidence of discrimination in homeowners' insurance against African
American and Latino neighborhoods across the country.

In May, Nelson announced he'd created an internal task force to
conduct a review of the use of credit reports and to recommend
policies. The result was the new rule.

In the future, examiners with the Florida Department of Insurance will
be able to review insurance company records to make sure that
applicants aren't being unfairly discriminated against through the use
of credit checks.

A copy of the new disclosure rule follows:

DEPARTMENT OF INSURANCE

NOTICE OF CHANGE IN PROPOSED RULE

Pursuant to Section 120.54(13)(b), Florida Statutes, notice is hereby
given that the Department of Insurance has made changes to Rule
4-125.004 "Credit Report Disclosure," which was noticed in Volume 22,
No. 27, of the Florida Administrative Weekly, issued on July 5, 1996,
and otherwise as required. The change is made to address concerns
expressed at public hearing. The rule has been changed to read as
follows:

4-125.004 Credit Report Use and Disclosure in Consideration of
Insurance Applications.

(1) The purposes and scope of this rule are:

(a) To assure that insurance applicants are given notice when credit
reports will be requested and reviewed in underwriting an insurance
application; and

(b) To prevent the unfairly discriminatory use of credit reports in
underwriting insurance applications.

(c) This rule applies to the underwriting of applications for personal
lines, automobile and homeowners insurance only.

(2) For purposes of this rule:

(a) The term "credit report" means any written, oral or other
communication of any information by a consumer reporting agency (as
defined in the Federal Fair Credit Reporting Act) bearing on a
consumer's credit worthiness, credit standing, or credit capacity,
which is used or expected to be used or collected in whole or in part
for the purpose of serving as a factor in establishing the consumer's
eligibility for personal lines automobile or homeowner insurance to be
used primarily for person, family or household purposes.

(b) The term "adverse underwriting decision" means a decision to
reject an insurance application or to issue the policy with
restrictions that would not apply but for the consideration of the
credit report.

(3) Any insurer that requests or utilizes credit reports in the review
of personal lines automobile or homeowner insurance application shall
maintain and adhere to written procedures established by the insurer
which shall specify.

(a) The circumstances under which credit reports will or may be
requested and the reports will or may be used in underwriting
decisions:

(b) That the insurer shall notify the applicant prior to such request
that a credit report will or may be requested in connection with an
insurance application.

(c) That this notification shall be written, or in the same medium as
the application. If the insurer is using the application to provide
notice, then it shall provide a space for the initials of the person
completing the application, denoting that the notice was
provided. Once notice is given to an applicant, it need not be
provided again as to subsequent application by the same applicant.

(d) That the decision to request a credit report will not be made
based upon race, color, creed, marital status, sex or national origin
of the applicant; and

(e) That any applicant that is affected by an adverse underwriting
decision as defined in this rule shall be advised of the means by
which the applicant can obtain a copy of the credit report.

(4)(a) Any insurer that requests or utilizes credit reports in
consideration of an application for personal lines automobile or
homeowners insurance shall maintain evidence of its compliance with
the written procedures prescribed in (3).

(b) The evidence need not be in any particular form, so long as it is
sufficient to reasonably demonstrate compliance.

(c) The evidence shall be made available for review by the Department
at the offices of the insurer for examination by the Department.

(d) When an insurer within the scope of this rule denies an
application based on information in a credit report, the reasons
accompanying the notice of denial as specified by Section 627.4091,
Florida Statutes, must indicate the means by which the applicant may
obtain a copy of the credit report and by which the applicant may
identify the specific items in the credit report and which resulted in
the denial. Evidence of the notice of denial shall be retained by the
insurer and a record of the contents of the credit reports shall be
maintained by the insurer or pursuant to the insurer's agreement with
the consumer reporting agency for a sufficient time to be available
during the next market conduct examination conducted pursuant to
Section 624.3161. F.S.

Specific Authority 624.308(1), 626.9611 FS. Law Implemented
626.964(1)(a), 626.9541(1)(a)4 and (x).627.4091 FS. History -- New.