Travelers suspends / then lifts suspension on new Homeowners Business

Travelers Insurance Company has reacted to the July 1, 2003 change in Georgia law regarding Insurance Scoring by temporarily suspending the use of Insurance Scoring in their property lines.

Because Travelers will not be using Insurance Scoring, they have suspended writing new business in the Preferred Tiers unless a valid insurance score was obtained prior to July 1st and formal book transfers.

I was told that Travelers wanted time to make sure that they were in full compliance with the new Insurance Scoring law. 

On July 21, 2003 Travelers lifted the suspension with a few changes:

"We will not deny, cancel or nonrenew based solely on an insurance score or the presence of a bankruptcy, collection, repossession, lien foreclosure, judgment, or serious delinquency. We are eliminating the not eligible score and will accept any score in the Near Standard tier. However, an applicant with a score of less than fair and with one or more losses in the last three year in ineligible. In Point of Sale, risks with a score less than fair will receive the following message:

    "LOW SCORE! This risk qualifies for our Near Standard pricing tract based on the Insurance Score alone. This report is not a final recommendation. You must review the CLUE report along with all of the underwriting guidelines to independently determine eligibility. If the CLUE shows a valid loss, then the applicant is "NOT ELIGIBLE" for coverage. Our decision is based upon a combination of losses and Insurance Score."

For many years, the legality of using credit in underwriting has been unclear at best. It didn't appear that any DOI Rules & Regulations' restrictions existed in the homeowner insurance arena while the use of credit in the automobile was allowed unless it was: not actuarially supported; not relevant to risk; and not based on a reasonable consideration allowed under § O.C.G.A. 33-9-4(7), a statute which refers to the grouping of risks by classification.

HB 215 is our Legislature's attempt to clear up the confusion, enable carriers to make use of today's technology and protect the insurance consumers of Georgia.

Use of Credit in Underwriting Personal Lines: HB215  

 To view the full text of HB 215 (§ O.C.G.A. Chapter 24 of Title 33), click on the following link …

http://www.legis.state.ga.us/legis/2003_04/search/hb215.htm

  Get a cup of coffee, sit back and see if your interpretation differs from mine. 

In any case, I urge you to share your opinions with our Legislature. To view insurance-related bills or to send an e-mail to your Legislator, click on "How to contact your Legislator". 

FYI’s Interpretation of HB215:  

33-24-91 says that personal lines companies are not required to use insurance scores but if they do, the company: 

Can’t calculate insurance score using income, gender, race, address, zip code, ethnic group, religion, marital status or nationality of consumer. (1) 

Can’t deny, cancel, non-renew or base renewal rates solely on credit information. (2) & (3) 

Can’t deny, cancel, increase premium nor reduce coverage solely because consumer does not have a credit card. (4) 

In the absence of credit information or the inability to calculate an insurance score, the insurer has to use only other DOI approved underwriting guidelines unless the insurer can present information that such absence or inability relates to the risk. (5)(A) 

Can’t use credit inquiries not initiated by consumer or inquiries requested by consumer for his or her own credit information as a negative factor in any insurance scoring methodology. (8)(A) 

Can’t use insurance coverage inquiries or collection accounts with a medical industry code if so identified on report. (8)(B) & (C) 

Can’t use multiple home mortgage or automobile industry lender inquiries made within 30 days of one another, unless only one inquiry is used. (8)(D) & (E) 

Has to obtain and use a credit report or an insurance score within 180 days from inception or renewal if planning to deny, cancel, increase premium nor reduce coverage based on credit information. (6) 

Has to recalculate the insurance score or order an updated credit report no less than every 36 months. (7) 

Has to notify the consumer of his / her right at annual renewal to request re-underwrite / re-rate using an updated credit report. The notification must also inform the consumer that it may result in a higher rate, a lower rate, no premium change or other consequences, including non-renewal or termination of the policy. (7)(A) 

The insurer doesn’t have to run the annual credit report if the consumer is in the company’s most favorably priced tier but can if it is consistent with its underwriting guidelines. (7)(C)(ii) 

The insurer can at its discretion use credit for underwriting or rating renewal offers even if not used at inception. (7)(C)(iii) 

33-24-92 says that personal lines companies can’t use properly Disputed Items during the 45-day period pursuant to the federal Fair Credit Reporting Act. 

33-24-93 is a little fuzzy. It states that the insurer or its agent shall disclose, either on the application or at the time the insurance application is taken, that it may obtain credit information. The disclosure “shall be either written or provided to an applicant in the same medium as the application for insurance.” 

Is a quote which requires an insurance score in its underwriting the same as an “application”? 33-24-90 defines everything but “application for insurance”.  

Do we have the right to initiate a credit score without written permission?  

Do we have the right to bind coverage without signatures? I think that right is reserved for the Internet and 1-800 carriers who do not include commissioned agents in the application process. 

33-24-94 attempts to make sure our applicants are given clear and specific language as to identify the basis for an insurer’s adverse decision. Such notifications must include a description of up to four factors that were the primary influences of the adverse action. While the use of generalized terms such as “poor credit history”, “poor credit rating”, or “poor insurance score” does not meet the explanation requirements of the proposed bill, the standardized explanations provided by the consumer reporting agencies are acceptable. 

It appears agents will still be unable to offer any explanation when delivering the adverse underwriting decision other than “You have to contact the consumer reporting agency” as the applicant storms out of your office or slams the phone down in your ear! 

33-24-95 requires insurers to file their scoring models with the DOI. Steve Manders of GA's DOI states that any company that files on or before July 1, 2003 will be temporarily viewed as having complied with this new statute unless there is an obvious issue of noncompliance within their model or rules. Any carriers that file after July 1 may use credit as of the date filed as long as their filing isn't in obvious noncompliance. The DOI cannot offer the filing for public disclosure as it is considered to be a trade secret and proprietary information. 

33-24-96 requires insurers to indemnify, defend and hold harmless its agents as long as the agent follows all established procedures. 

Sounds good but that applies in all activities of licensed agents. When was the last time that you followed all procedures to the letter? 

33-24-97 prohibits the consumer reporting agencies from providing or selling the data or lists’ information including but not limited to, expiration dates, except to the originating agent or agent’s insurance company on whose behalf the insurance score was requested. 

The Act became effective on July 1, 2003, and will apply to all personal insurance policies issued or renewed on or after that date.

Still a little confused as to the role of the agent in all of this? Not to worry ... Progressive Insurance will be presenting a three hour Ethics CE seminar on Insurance Scoring on Friday morning, August 15th from 8:30 a.m. - 11:30 a.m. at Insurance Expo 2003.

Since the Insurance Scoring topic deals with Georgia law, Progressive's seminar will satisfy your annual Ethics CE requirement.

Insurance Scoring involves mathematical formulas that are transmitted via the Internet. In keeping with the "Hollywood Nights" theme, Progressive's 3 hour CE seminar is entitled "Matrix Uploaded"!

Click here for Insurance Expo Registration / Agenda Information.

We hope to see you at Insurance Expo 2003.