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Can your insurer hold your credit report against you?

There are no provisions in any state that prevent insurers from obtaining your credit report before they sell you a property/casualty policy, according to National Association of Independent Insurers (NAII) spokesperson Joe Annotti. However, some states restrict how your credit report can be used in the underwriting and rate-making process. In addition, many states require insurers to notify you when they obtain your credit report.

The following chart lists the state laws that regulate the use of credit reports in insurance underwriting.

Laws on the use of credit reports
in insurance underwriting
State
Citation
Synopsis
Alabama
No regulatory provisions.
Alaska
?21.36.210
Limits the reasons for which a policy can be canceled to nonpayment of premium and suspension or revocation of license.
?21.36.150
Sets forth procedures for undefined unfair practices.
?21.36.120
Lists prohibited inducements and defines unfair discrimination in rates.
?21.39.030
Lists the appropriate rate-making standards.
Arizona
?20-383
Lists the appropriate rate-making standards.
?44-1692
Permits a consumer reporting agency to furnish a credit report to people it believes intend to use the report in connection with the underwriting of insurance.
House Bill-2233
Prohibits providing or selling any privileged information received through an insurance transaction.
Arkansas
?23-66-317
Applies only to automobile policies, limits the conditions under which a credit report may be used, and sets forth procedures to be followed if a credit report is used to refuse to renew coverage, deny coverage, or limit coverage in any manner. Prior consumer notification not specified.
California
Civ. ?1786.40
Requires notice to the consumer if credit report has an adverse effect on underwriting decision.
Ins. ?1861.03
Limits the reasons for auto policy cancellation to non-payment, fraud, or increase in hazard.
?1785.11
Permits a consumer reporting agency to furnish a credit report to people it believes intend to use the report in connection with the underwriting of insurance.
?1785.20.1
Requires consumer notification prior to using credit information when the consumer does not initiate the transaction.
Civ. ?1785.20
Sets forth procedures to be followed if adverse action is taken based in whole or in part on a credit report.
Colorado
?12-14.3-103
Permits a consumer reporting agency to furnish a credit report to people it believes intend to use the report in connection with the underwriting of insurance. Consumer to be notified of credit report use at time of application.
10-4-116
Prohibits use of credit scoring for the acceptance, denial, rating, or renewal of a potential insured for homeowner's insurance.
?12-14.3-105.3
This law states that information found in a credit report may be used in the underwriting of a life insurance policy with a value of $150,000 or more.
10-4-110.7
Establishes notification requirements where credit information is used during application.
Connecticut
?38a-982 and 983
Both set forth standards for insurer use of investigative credit reports that include credit history. Notice is to be given to the consumer if such a report is to be used.
Delaware
The law is silent but changes are pending.
Washington, D.C.
No regulatory provisions, but insurers must apprise candidates with a written disclosure about the use of credit report.
Florida
Rule 4-125.004
Requires notification of the use of credit reports in underwriting. Notification must be in the same medium as the application. Sets forth further requirements on disclosures necessary for use of credit reports.
Georgia
?120-2-65-.03
Applies to private passenger auto. No insurer shall use underwriting criteria that results in fictitious grouping and unfair discrimination. Various factors, including the use of credit reports, may be used to determine the grouping of risks. However, any such grouping, including the use of credit reports, is fictitious and unfairly discriminatory only if not actuarially supported.
Hawaii
?431:10C-207
Prohibits insurers from basing any standard or rating plan on credit rating; no notice to consumer required.
?431:10C-409
Prohibits the commissioner from using credit rating to establish rates. No notice to consumer required.
Idaho
Bulletin 91-9
Using a credit report without adhering to the requirements set forth in the Fair Credit Reporting Act (15 U.S.C. section 15800 et. seq) is deemed to be an unfair trade practice. No notice to consumer required.
Illinois
House bill 2419
Effective Oct. 1, 2001, if an insurance company makes an adverse underwriting decision, the company must disclose the basis for the decision to the affected individual. Requires disclosure of information related to credit worthiness when the adverse underwriting decision is based upon a report of credit worthiness. .
Indiana
No regulatory provisions.
Iowa
SB 2257
Prohibits personal lines insurer from using an insurance score that is calculated using income, race, gender, zip code, disability, religion, color, national origin, ancestry, or marital status of the consumer as a factor. Includes non-commercial farms within scope of the law.
Kansas
?40-2,112
Requires insurers to give a specific reason for an adverse underwriting decision; no notice to consumer required.
?40-2404
Makes failure to comply with ?40-2,112 an unfair trade practice. No notice to consumer required.
Kentucky
?304.20-040
Prohibits insurance companies from making policy decisions based solely on credit history. No notice to consumer required.
806 KAR 20:010
States that if the policy is declined, canceled, or nonrenewed due to investigative consumer reports, the consumer is to be notified.
Louisiana
22:1214(7)(i)
Prohibits insurers from discriminating based on a consumer's financial status or a filing of bankruptcy by an insured; no notice to consumer required.
Maine
24-A ?2917
States that insurers may not cancel or nonrenew an auto policy based on a credit report without an explicit reason to the consumer.
24-A ?3049
Sets forth the permissible reasons for cancellation of property insurance (excludes credit history).
24-A ?3051
States that insurers may not cancel or nonrenew property policy based on credit report without an explicit reason to the consumer.
10 ?1312
Defines "consumer report" and lists the permissible purposes of a consumer report, including the underwriting of insurance.
10 ?1313-A
Allows a consumer reporting agency to release credit information to people the agency believes will use the information in connection with the underwriting of insurance. Prior notice required if consumer did not initiate transaction.
?1320 and 24-A ?2212
Sets forth duties of insurers taking adverse action based on information found in consumer reports, including provision to notify consumer.
?14-1202
Allows a consumer reporting agency to release credit information to people the agency believes will use the information in connection with the underwriting of insurance. Prior notice required if consumer did not initiate transaction.
Maryland
27-501
Prohibits auto insurers from refusing to issue a policy based solely on an applicant's credit history.
27-605
Replaces a provision allowing motor vehicle insurer rating a new policy based in whole or in part on credit history to provide up to a 40 percent discount or surcharge, if actuarially justified.
Massachusetts
Ch. 93 ?51
States that a consumer credit report may be given to a person who intends to use the report in the underwriting of insurance.
Ch. 93 ?62
Sets forth the procedures that are to be followed when insurance is denied, or rates increased, because, in whole or in part, of a credit report.
?1751:10
States that in the event of an adverse underwriting decision, the insurer is to provide the specific reasons for the decision as well as the sources of information used.
Michigan
?500.2120
Sets forth factors permitted to be considered for underwriting purposes. Credit reports are not specifically mentioned, thus their use is prohibited.
?500.2111
Sets forth factors to be considered for underwriting purposes, but permits insurers to use additional factors if, after a hearing, the commissioner finds that those factors are consistent with the purposes of the statute.
Minnesota
?72A.491, et. seq.
States that at the time of application, the consumer is to receive written notice of the insurer's information practices, including use of credit history. The consumer must sign an authorization for the disclosure or collection of personal or privileged information.
Mississippi
No provisions
Missouri
20 CSR 500-9.100
Applicable to homeowners insurance. Requires that all underwriting guidelines be in writing and filed with the department; no notice to consumer required.
Montana
?33-18-210
Applies to homeowners and automobile policies. Sets forth the procedures to be used in order for an insurer to use credit history in the issuance of a policy, setting of rates, refusal to renew, or limiting the scope of a policy. Also requires that the credit information be "significantly correlated" with the types of risks to be insured. Consumer to be notified if credit history is the reason for denying, nonrenewing, or limiting coverage.
?31-3-113
Sets forth standards for an insurer's use of investigative consumer reports that include credit history. Notice is to be given to the consumer if such a report is to be used.
?31-3-131
Sets forth the requirements for use of credit reports. Notice is to be given to the consumer if such a report is to be used.
?31-3-111
States that consumer-reporting agencies may furnish consumer reports to those who it believes intend to use the information for underwriting insurance involving the consumer.
?33-19-101, et. seq.
States that written notice of information-gathering practices must be provided to a consumer no later than at the time the policy is delivered or at the time of collection if personal information is collected from a source other than the applicant. The consumer must sign a written authorization before information is collected or disclosed.
Nebraska
?44-5001 et. seq.
The Nebraska Property and Casualty Rate Reform Act (44-5001 et. seq.) requires underwriting guidelines to be filed with the department and that rates are not unfairly discriminatory; no notice to consumer required.
Nevada
NAC 679B.715
States that in the event of an adverse underwriting decision, the insurer is to provide the specific reasons for the decision as well as the sources of information used (credit reports not specifically mentioned).
NAC 679B.725
States that insurers may not base adverse underwriting decisions, in whole or in part, on information received from an insurance-support organization (this may include credit reports), but may use it as additional supportive information for an adverse decision.
New Hampshire
Ins. 1401.08(e)
Applies to automobile policies. Unsubstantiated information regarding credit history may not be used to determine the reason for refusal to write, refusal to renew, or cancellation of policies. Such information may be considered if validated by a responsible secondary source.
?359-B:4
States that it is a permissible use of a credit report to someone who intends to use the information in connection with the underwriting of insurance. Prior notice to consumer required if transaction is not initiated by consumer.
?359-B:6
States that no investigative consumer report that includes credit history may be compiled without the consumer being notified.
?359-B:15
States that if insurance is canceled, nonrenewed, or the rate increased due to information in a credit report, the consumer is to be notified.
?412:14a
Prohibits insurers from assessing risk of loss or establishing premiums for auto or homeowners insurance based on information relating to credit.
?417:4(VIII)(a)
Prohibits unfair discrimination between people of essentially the same class and hazard (does not specify credit history).
New Jersey
17:23A-4
States that at the time of application, the consumer is to receive notice of the insurer's information practices, including use of credit history.
56:11-31
States that it is permissible to give a credit report to someone who intends to use it in connection with the underwriting of insurance.
New Mexico
No provisions
New York
Ins. ?2304
States that underwriting information must be filed with the department and must be relevant to the risk being underwritten.
Senate Bill 5618 (not yet codified)
Insurers are not allowed to deny coverage based solely on a credit score or to non-renew or increase premiums based on credit information.
Ch. 20, Art. 25 380-b
States that no investigative consumer report that includes credit history may be compiled without the consumer being notified.
Gen. Bus. 380-i
Sets out duties of the insurer when coverage is denied based in whole or in part on information in a consumer report.
North Carolina
?58-39-25
States that at time of application, the consumer is to receive notification of the insurer's information practices, including the use of credit history.
?58-39-65
States that insurers may not base adverse underwriting decisions in whole or in part on information received from an insurance-support organization (this may include credit reports), but may use it as additional supportive information for an adverse decision.
North Dakota
No provisions
Ohio
?3904.04
States that at the time of application, the consumer is to receive notification of the insurer's information practices, including the use of credit history.
3904.12
States that insurers may not base adverse underwriting decisions on information received from an insurance-support organization (this may include credit reports).
1349.51
No consumer reporting agency shall sell or otherwise furnish any information relative to an individual's insurance coverage that was submitted, in whole or in part, in conjunction with an insurance company's inquiry into an individual's credit history or request for a consumer report. This information includes, but is not limited to, the expiration date of an insurance policy, information that may be used to find a policy's expiration date or approximate expiration date, and the terms and conditions of an insurance policy.
Oklahoma
36 ?1204
States that an insurer cannot discriminate between two consumers having essentially the same risk and the same exposure.
Oregon
?746.665
Prohibits insurance companies from disclosing information gathered from credit-reporting agencies.
?746.620
States that at the time of application, a consumer is to receive notice of an insurer's information practices, including the use of credit history.
?746.660
States that insurers may not base adverse underwriting decisions in whole or in part on information received from an insurance-support organization (this may include credit reports), but may use it as additional supportive information for an adverse decision.
Pennsylvania
No provisions
Rhode Island
?6-13.1-21
States that if the insurance is canceled, nonrenewed, or the rate is increased due to information in a credit report, the consumer is to be notified.
South Carolina
?38-77-30
Defines insurance-support organizations as those collecting information for consumer reports to furnish to insurers for underwriting purposes; implies credit reports may be used.
South Dakota
?20:06:14:03 (7)(a)
States that when recommending a policy for a consumer to purchase, insurer may take the consumer's financial condition into consideration.
Tennessee
Code 56-5-402,403
Prohibits the use of credit without the consideration of other independent factors. Requires insurers using credit information to disclose such use. Mandates that an insurer taking adverse action due to credit information, disclose it through written notification. Insurers utilizing credit scoring in underwriting must disclose their scoring models with the Insurance Department.
Texas
?20.05
Permits use of credit reports in underwriting life insurance for an amount of $150,000 or more.
?20.02
States that a consumer-reporting agency may furnish a consumer report to a person the agency has reason to believe intends to use the information in connection with the underwriting of insurance involving the consumer as authorized under the Fair Credit Reporting Act (15 U.S.C Section 1681 et seq.).
Utah
?31A-22-1307
Pertains to residential dwelling insurance only. Prior notice of the use of consumer reports by insurers required.
Vermont
8?4724
Prohibits unfair discrimination between consumers of essentially the same class and risk (does not specify credit history).
Virginia
?38.2-2212(r)
Applies to liability policies. Allows insurers to cancel a policy based solely on information obtained in a credit report, only if the insurer follows the procedures set forth in the law.
?38.2-2114 (11)
Applies to fire policies. Allows insurers to cancel a policy solely based on information obtained in a credit report if the insurer follows the procedures set forth in the law.
?38.2-604
States that at time of application, consumer is to receive notice of insurer's information practices, including use of credit history.
Washington
?19.182.110
States that if any adverse action is taken against a consumer based in whole or in part on information in a credit report, the consumer is to be notified of such in writing.
19.182.020
States that it is permissible to give a credit report to someone who intends to use the information in connection with the underwriting of insurance.
Insurance Department Bulletin 96-2
States that it is not sufficient for an insurer to merely state that the reason for non-renewal is based on having a poor credit report. An insurer must refer clearly to the content of the credit report being relied on, as well as the reasoning to support the adverse decision..
RCW 48.02.120(3)
Requires any insurer utilizing consumer credit history to determine rates, premiums, or eligibility to file all rate plans with the Insurance Department.
West Virginia
Regs. 91-8-3
The Department of Motor Vehicles will only release credit reports to people who intend to use the information for underwriting purposes.
Wisconsin
No regulatory provisions. If a consumer is denied coverage, however, and files a complaint with the Office of the Commissioner of Insurance, the department will request that the insurer provide a reason other than the consumer's credit report for the denial.
Wyoming
No regulatory provisions.

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