First Regular Session Sixty-fifth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 05-0190.01 Kristen Forrestal HOUSE BILL 05-1031 HOUSE SPONSORSHIP Butcher, SENATE SPONSORSHIP Tochtrop, House Committees Senate Committees Business Affairs and Labor A BILL FOR AN ACT Concerning a prohibition against the use of credit-based insurance scoring for insurance underwriting purposes. Bill Summary (Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.) Prohibits an insurer from using credit scoring for the acceptance, denial, renewal, or rating of a potential insured for insurance underwriting purposes in connection with property and casualty insurance. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Repeal. 10-4-110.7 (2) (a), Colorado Revised Statutes, is repealed as follows: 10-4-110.7. Cancellation or nonrenewal of policies of homeowner's insurance. (2) (a) If an insurer uses underwriting criteria based on an individual's credit score, the claims history of the property, or the claims history of the applicant, the insurer shall notify the applicant of the use of such criteria during the application process. SECTION 2. 10-4-116, Colorado Revised Statutes, is REPEALED AND REENACTED, WITH AMENDMENTS, to read: 10-4-116. Credit-based insurance scoring prohibited. An insurer shall not use credit scoring for the acceptance, denial, renewal, or rating of a potential insured for insurance underwriting purposes in connection with property and casualty insurance. SECTION 3. Repeal. 10-4-616, Colorado Revised Statutes, is repealed as follows: 10-4-616. Disclosure of credit reports. (1) (a) Insurers using new or updated credit information in insurance underwriting or rating shall notify applicants or policyholders that their credit information will be used for underwriting or rating. (b) When an insurer uses a producer for such disclosure, the insurer shall provide the producer with the form of such notice and use a reasonable means to verify that such notice is given. The disclosure notice form shall be developed by the insurer. (c) Upon request by an applicant or policyholder, an insurer or producer shall provide an explanation of the significant characteristics of the credit information that impact the policyholder's insurance score. This information may be included in the disclosure notice form. (2) If the use of credit information results in an adverse action to a consumer, the insurer shall comply with the notice requirements of the federal "Fair Credit Reporting Act", 15 U.S.C. sec. 1681 et seq. Such notice shall include, but is not limited to: (a) The identity, telephone number, and address of any consumer reporting agency from whom a credit report was obtained; (b) Notice of the consumer's right to receive a free credit report from the consumer reporting agency for a period of sixty days if such report resulted in an adverse action; and (c) Notice of the consumer's right to lodge a dispute with the consumer reporting agency and have any erroneous information corrected in accordance with the federal "Fair Credit Reporting Act", 15 U.S.C. sec. 1681 et seq. (3) For the purposes of this section, "adverse action" means a denial, cancellation, or nonrenewal of, an increase in any charge for, a placement into a higher tier, or a reduction or unfavorable change in the terms of coverage or amount of insurance in connection with underwriting of existing insurance or an application for insurance. SECTION 4. Repeal. 12-14.3-103 (1) (c) (III), Colorado Revised Statutes, is repealed as follows: 12-14.3-103. Permissible purposes - prohibition. (1) A consumer reporting agency may furnish a consumer report only under the following circumstances: (c) To a person which the consumer reporting agency has reason to believe: (III) Intends to use credit scoring information in connection with the underwriting or rating of insurance involving the consumer and such person establishes that the consumer has received written notification, or notification in the same medium as the application for insurance, that a credit report may be requested in connection with his or her application for insurance, and that credit scoring information may be used to determine either the consumer's eligibility for insurance or the premium to be charged to the consumer; or SECTION 5. Effective date - applicability. (1) This act shall take effect January 1, 2006. (2) However, if a referendum petition is filed against this act or an item, section, or part of this act during the 90-day period after final adjournment of the general assembly that is allowed for submitting a referendum petition pursuant to article V, section 1 (3) of the state constitution, then the act, item, section, or part, shall not take effect unless approved by the people at a biennial regular general election and shall take effect on the date specified in subsection (1) or on the date of the official declaration of the vote thereon by proclamation of the governor, whichever is later. (3) The provisions of this act shall apply to insurance policies issued or renewed on or after the applicable effective date of this act.