AN ACT
RELATING TO INSURANCE; ENACTING THE PERSONAL INSURANCE CREDIT INFORMATION ACT; REGULATING THE USE OF CREDIT INFORMATION FOR PERSONAL INSURANCE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. SHORT TITLE.--This act may be cited as the "Personal Insurance Credit Information Act".
Section 2. PURPOSE AND APPLICATION.--The Personal Insurance Credit Information Act regulates the use of credit information in the underwriting, rating or renewal of personal insurance for the protection of consumers and applies to personal insurance written by an insurer or a group of affiliated insurers authorized to do business in this state or written pursuant to the FAIR Plan Act, but does not apply to commercial insurance or any other types of insurance.
Section 3. DEFINITIONS.--As used in the Personal Insurance Credit Information Act:
A. "adverse action" means a denial or cancellation of, an increase in a charge for or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, insurance, existing or applied for, in connection with the underwriting, rating or renewal of personal insurance, which adverse action occurs when an insurer offers insurance at less favorable terms than it would have offered a consumer if the consumer's credit information had been more favorable;
B. "affiliate" means a company that directly or indirectly controls, is controlled by or is under the common ownership or control of another company;
C. "company placement" means the assignment of a consumer to a particular insurer within a group of affiliates;
D. "consumer" means an individual applicant or insured whose credit information is relied upon or used to calculate an insurance score for underwriting, rating or renewing a personal insurance coverage;
E. "consumer reporting agency" means a person or entity that, for monetary fees, dues or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties;
F. "credit information" means a written, oral or other communication of information prepared by a consumer reporting agency or provided by the consumer on an application for or renewal of credit, bearing on a consumer's credit worthiness, credit standing or credit capacity, that is used or expected to be used or collected in whole or in part for the purpose of underwriting, rating or renewing a personal insurance coverage;
G. "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 information and is used for underwriting, rating or renewing personal insurance coverage;
H. "personal insurance" means private passenger automobile, homeowners', motorcycle, mobile-homeowners', boat, personal watercraft, snowmobile, recreational vehicle, noncommercial dwelling fire, personal umbrella or any other type of insurance policy that is individually underwritten for personal, family or household use; and
I. "superintendent" means the superintendent of the insurance division of the public regulation commission.
Section 4. USE OF CREDIT INFORMATION--LIMITS ON USE.--An insurer or group of affiliated insurers authorized to do business in New Mexico that uses credit information to underwrite, rate or renew personal insurance coverage shall not:
A. use an insurance score that is calculated using income, gender, address, race, color, national origin, religion or marital status of the consumer as a factor;
B. deny, cancel or fail to renew coverage, or base a consumer's company placement, tier placement or rates, on the basis of credit information or an insurance score without consideration of other underwriting factors permitted by state law;
C. consider an absence of credit information or an inability to calculate an insurance score in underwriting, rating or renewing personal insurance coverage unless the insurer:
(1) classifies the consumer as having average or better than average credit information for that insurer or group of affiliated insurers; or
(2) excludes the use of credit information as a factor in rating or underwriting personal insurance coverage;
D. take adverse action against a consumer based upon credit information, or upon an insurance score calculated from credit information, submitted more than ninety days before the date of notice of the adverse action;
E. use credit information upon renewal unless the insurer obtains current credit information and recalculates the insurance score at least every thirty-six months. Upon the request of a consumer, an insurer that uses credit information upon renewal shall obtain current credit information and recalculate an insurance score. An insurer shall not be required to obtain current credit information or recalculate an insurance score more frequently than every twelve months except for the correction of an error as described in Section 6 of the Personal Insurance Credit Information Act. The Personal Insurance Credit Information Act does not require an insurer to obtain current credit information or recalculate an insurance score if:
(1) an improved insurance score would not cause the consumer to be placed in a more favorably priced company or tier of the insurer; or
(2) the insurer does not rely upon credit information or an insurance score to underwrite, rate or renew the consumer's personal insurance coverage;
F. use an insurance score in whole or in part to deny, restrict or alter the fees charged for a premium payment plan; or
G. use credit inquiries as a factor in any insurance scoring methodology or to underwrite, rate or renew personal insurance coverage.
Section 5. EXCEPTION PROCEDURES.--
A. As used in this section, "extraordinary life circumstance" means:
(1) an acute or chronic medical condition, illness, injury or disease;
(2) divorce;
(3) death of a spouse, child or parent;
(4) involuntary loss of employment for more than three consecutive months;
(5) identity theft;
(6) total or other loss that makes a home uninhabitable; or
(7) other circumstances prescribed by the superintendent in a rule.
B. Insurers that use credit information to calculate an insurance score or to underwrite, rate or renew personal insurance coverage shall, upon written request from a consumer, provide a reasonable exception to the insurer's rates, rating classifications, company placement, tier placement or underwriting policies, procedures or guidelines when that consumer's credit information has been adversely impacted by an extraordinary life circumstance that has occurred within three years of the date of application for or renewal of personal insurance coverage.
C. Insurers shall file their extraordinary life circumstances exception policies and procedures and amendments to the policies and procedures with the superintendent. Filings shall include the following:
(1) a list of extraordinary life circumstances;
(2) procedures describing how a consumer may apply for the extraordinary life circumstances exception;
(3) a description of the required substantiating information;
(4) general guidelines for when an extraordinary life circumstances exception will be granted;
(5) a description of how a consumer's treatment in underwriting or rating would be modified by the granting of an extraordinary life circumstances exception;
(6) time frames for considering the extraordinary life circumstances exception request; and
(7) any other information prescribed by the superintendent in a rule.
D. An insurer's extraordinary life circumstances exception policies and procedures shall be effective for use upon filing with the superintendent.
E. The superintendent may disapprove an insurer's extraordinary life circumstances exception policies or procedures at any time upon providing the insurer with a sixty-day written notice setting forth the reasons for the disapproval. Disapproval shall be based upon a determination that the extraordinary life circumstances exception policies and procedures as contained in the filing are inadequate pursuant to this section, and the notice of disapproval shall specify the respects in which they are inadequate. An insurer affected by a disapproval may request a hearing before the superintendent pursuant to Section 59A-4-15 NMSA 1978, and the request for a hearing stays the effectiveness of the disapproval. No disapproval shall affect an action or determination made by an insurer concerning an application or policy of insurance made prior to the date of a notice of final determination of the disapproval.
F. An insurer may require the consumer to provide reasonable, independently verifiable written documentation of the event and the direct effect of the event on the consumer's credit before granting an exception.
G. An insurer that grants an extraordinary life circumstances exception shall maintain that exception for an amount of time that is reasonable for the particular circumstance. Once that reasonable amount of time is exhausted, the insurer is not required to grant another exception for the same specific extraordinary life circumstance.
H. An insurer is not out of compliance with a law or rule relating to underwriting, rating or rate filing as a result of granting an exception under this section.
Section 6. ERROR CORRECTION.--If it is determined by a consumer reporting agency that a consumer's credit information is inaccurate or incomplete and the insurer is notified of this determination by the consumer reporting agency or the consumer, the insurer or its group of affiliated insurers shall re-underwrite and rerate the consumer's personal insurance coverage within thirty days of receiving the notice, refund any overpaid premium and, if necessary, make a related adjustment, including company placement, consistent with its filed underwriting and rating guidelines.
Section 7. INITIAL NOTIFICATION OF USE OF CREDIT INFORMATION.--
A. If an insurer uses credit information to calculate an insurance score to underwrite, rate or renew personal insurance coverage, the insurer shall disclose to the consumer at least once, either at the time of application or upon the first renewal subsequent to December 31, 2005, in writing or in the same medium as the application or renewal, that it uses that information.
B. An insurer may use the following disclosure language to comply with the requirements of this section: "In connection with your application for insurance coverage, we may review and use information contained in your credit report to help determine your premium or your eligibility for coverage.".
Section 8. ADVERSE ACTION NOTIFICATION.--
A. If an insurer takes an adverse action based upon credit information, the insurer shall notify the consumer in writing, or in the same medium as the application or renewal, of the nature of the adverse action, the reasons for the adverse action and the insurer's extraordinary life circumstances exception policies and procedures as provided by Section 5 of the Personal Insurance Credit Information Act.
B. The notification shall identify, in clear and simple language and in descending order of importance, the four most important factors that prevented the consumer from receiving a more favorable insurance score. The factors shall be identified with sufficient specificity that a consumer can identify the factors on a standard credit report.
C. In addition to the information described in Subsections A and B of this section, the notification shall include any other language prescribed by rule issued by the superintendent.
Section 9. INSURANCE SCORING FILINGS.--
A. Insurers and groups of affiliated insurers that use credit information or insurance scores to underwrite, rate or renew personal insurance coverage shall, prior to implementation or amendment, file with the superintendent their scoring models and all scoring ingredients and processes, including all criteria, matrices, weightings and score ranges, as well as all resulting rating factors and rating elements, and all resulting guidelines for accepting coverage, for company placement and for tier placement. A filing shall provide examples, either through electronic spreadsheets, formulas, tables or detailed written documentation, of how scores and underwriting and rating results can be obtained. The filing shall be provided on an affiliated group basis whenever an insurer is an affiliate of an insurance group.
B. A filing that includes credit information or insurance scoring shall include loss experience justifying the design and use of the model.
C. If an insurer files a scoring model that has already been filed with the superintendent by a rate service organization licensed by the superintendent pursuant to Section 59A-17-19 NMSA 1978, the insurer may reference the rate service organization's filing of the model. In such circumstances, if the insurer deviates in any way from the referenced model filed by the rate service organization, the insurer must explain in detail the nature of such deviations.
D. Scoring models, processes and guidelines shall become effective and may be used on the date of filing with the superintendent.
E. The superintendent may issue an order to disapprove a filing at any time upon providing the insurer with a sixty-day written notice of the disapproval. Any such disapproval shall be based upon a determination that the filing under this section is either inadequate pursuant to Subsection A of this section, will result in rates that do not comply with the applicable requirements of the Insurance Rate Regulation Law or will result in uses not compliant with Section 4 of the Personal Insurance Credit Information Act. The notice of disapproval shall specify the bases for the disapproval and the date on which the filing shall be deemed no longer effective. An insurer affected by such a disapproval may request a hearing before the superintendent pursuant to Section 59A-4-15 NMSA 1978, and the request for hearing stays the effectiveness of the disapproval. No disapproval shall affect an action or determination made by an insurer concerning applications or policies of insurance made prior to the date of notice of final determination of the disapproval.
F. Filings made pursuant to this section shall be considered confidential trade secrets under the Uniform Trade Secrets Act.
Section 10. RULEMAKING AUTHORITY.--The superintendent may adopt rules the superintendent deems necessary to implement and ensure full compliance with the provisions of the Personal Insurance Credit Information Act.
Section 11. SEVERABILITY.--If any part or application of the Personal Insurance Credit Information Act is held invalid, the remainder or its application to other situations or persons shall not be affected.
Section 12. APPLICABILITY.--The provisions of the Personal Insurance Credit Information Act apply to personal insurance policies written to be effective or renewed on or after January 1, 2006.
Section 13. EFFECTIVE DATE.--The effective date of the provisions of this act is January 1, 2006.