HBA-ATS H.B. 107 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 107
By: Alvarado
Insurance
2/25/1999
Introduced



BACKGROUND AND PURPOSE 

Currently, insurance companies use financial credit reports to make
underwriting decisions.  This use is consistent with federal law, which
authorizes a consumer reporting agency to furnish a consumer report to an
insurance company if it intends to use the information in connection with
the underwriting of insurance involving a transaction initiated by a
consumer.  It has been argued, however, that insurance companies should not
use credit reports to determine whether a person is an insurance risk,
because any correlation between insurance risk and credit history may be
unverifiable.  H.B.107 prohibits a property and casualty insurer from using
financial credit reports as a factor in determining whether to underwrite
automobile, homeowner's, or fire insurance, but does allow an insurer to
refuse to offer premium installment payments to a person whose insurance
was canceled because of failure to pay premiums in the preceding two years. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Subchapter B, Chapter 21, Insurance Code, by adding
Article 21.21-11, as follows: 

Art. 21.21-11.  PROHIBITION OF CERTAIN UNDERWRITING DECISIONS BASED ON
CREDIT REPORTS.   

Sec. 1. DEFINITIONS.  Defines "credit report" and "insurer."

Sec. 2.  APPLICATION.  Provides that this article applies to a personal
automobile insurance policy; a homeowner's or farm or ranch owner's
insurance policy; and a standard fire insurance policy for a one-family
dwelling, a duplex, or the contents of a one-family dwelling, duplex, or
apartment. 

Sec. 3.  PROHIBITION; EXEMPTION.  Prohibits an insurer from making an
underwriting decision based in whole or in part on a credit report.
Provides that an insurer may refuse to allow installment premium payments
for a person who failed to pay insurance premiums which caused a lapse in
the policy in the two years preceding the date of the request to pay in
installments.  

Sec. 4.  PENALTY.   Provides that an insurer who violates this article
commits an unfair practice in violation of Article 21.21 (Unfair
Competition and Unfair Practices) of this code and is subject to penalties
under that article.   

SECTION 2.  Effective date:  September 1, 1999.  
             Makes application of this Act prospective to insurance
policies that are delivered, issued for delivery, or renewed on or after
January 1, 2000. 
 
SECTION 3.  Emergency clause.