Recently, many constituents have voiced concerns about how insurance companies use credit history in determine rates and coverage. Remember, insurance companies are private sector businesses, albeit regulated by the state that have discretion in setting their prices and terms. Many other industries use credit scoring to include the auto sales industry, mobile phone industry, and the home mortgage industry to name a few. Texas law limits how auto and homeowner insurance companies, “property and casualty insurers,” may use a person’s credit history when providing consumers with rates and coverage.

The Texas Legislature has voted and passed laws which prohibit the use of an insurance score calculated by using factors that constitute unfair discrimination. According to Texas laws (Texas Insurance Code (TIC), Section 559.052), insurers cannot use credit as the sole basis for denying, cancelling, or failing to renew a policy, take an adverse action against a customer solely because they do not have a credit card account, or consider an absence of credit information (with limited exceptions). The insurer can use a lack of credit information if it has statistical or actuarial support, treats the consumer as if they have neutral credit information as defined by the insurer, or excludes the credit information as a factor in its underwriting.

In addition, Texas law requires property and casualty insurers to disclose to the consumer that the insurer used credit history in determining insurance rates and eligibility (TIC 559.053), disclose to the consumer if their credit history caused the insurance company to take an adverse action regarding their premium or coverage (TIC 559.054), and file their credit scoring models with the Texas Department of Insurance (TIC 559.151), who in turn will treat the models as public information for anyone’s review (TIC 559.152).

“House District 19’s citizens understand the importance of protecting their right to property. It is important to me that fairness is applied when determining premium rates of our Texans,” Rep. White said.

Consumers who wish to purchase coverage from insurers who do not use credit based insurance scoring may visit the TDI website for a list of companies that do not use it: http://www.helpinsure.com/help/documents/creditautohomenotuse.pdf.

Please do not hesitate to contact either Saul Mendoza, Chief of Staff, or Shawn Dunn, District Director, with questions regarding credit based insurance scoring at 512-463-0490 or 409-283- 3700.