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.