SECTION 1. Legislative intent. -- As the use of credit history and insurance scoring continues to increase in the rating and underwriting of personal lines of insurance in the State of Rhode Island, the legislature has reviewed its impact on the insurance marketplace and on Rhode Island consumers. Studies of the issue have revealed a strong body of evidence which clearly and convincingly shows that a credit score is a strong predictor of future loss. The data holds true regardless of variations in demographics.

The General Assembly finds that if insurance scoring is to continue to be allowed in our state it should be used in a fair and equitable manner for all Rhode Islanders. The General Assembly believes that a series of safe guards are required to insure that credit information used directly relates to the potential for future loss. The insurer should be required to demonstrate that policies would not be canceled solely on the basis of an insurance score and the manner to which they disclose to consumers the use of credit history. If insurance scoring is to continue in the state, reasonable requirements must be placed upon insurers to educate consumers as to the connection between credit history, insurance underwriting and loss experience.

SECTION 2. Chapter 27-6 of the General Laws entitled "Fire and Marine Insurance Rating" is hereby amended by adding thereto the following section:

27-6-53. Use of credit rating. -- An insurer may use insurance scoring for rating and underwriting of homeowners' insurance only under the following conditions:

(1) The insurer demonstrates the predictive nature of their insurance score to the insurance division.

(2) An insurer shall, once every two (2) years if requested by an existing customer, obtain an updated insurance score for the customer. If, after obtaining the insurance score, the customer has improved his, her or its credit rating, the user of the information shall afford the customer any decrease in rates that are available due to the improved rating. The user may not increase the rate of an existing customer based solely on a worsening in the customer's insurance score unless: (i) the worsening is due to a bankruptcy, tax lien, garnishment, foreclosure or judgment; or (ii) if a subsequent insurance score no sooner than six (6) months later confirms the worsening in score.

(3) An insurer shall not decline insurance for a new customer based solely on an insurance score, or absence of an insurance score; and an insurer shall not cancel, nonrenew or increase the rate of an existing customer based solely on a worsening in a customer's insurance score unless: (i) the worsening is due to a bankruptcy, tax lien, garnishment, foreclosure or judgment; or (ii) if a subsequent insurance score no sooner than six (6) months later confirms the worsening in score.

(4) No insurer is obligated to obtain a current credit report or insurance score for an insured if: the insured is in the most favorably-priced tier of the insurer, within a group of affiliated insures; or credit was not used for such insured when the policy was initially written. However, the insurer shall have the discretion to use credit for such insured upon renewal, if consistent with its underwriting guidelines. The user may not increase the rate of an existing customer based solely on a worsening in the customer's insurance score unless: (i) the worsening is due to a bankruptcy, tax lien, garnishment, foreclosure or judgment; or (ii) if a subsequent insurance score no sooner than six (6) months later confirms the worsening in score.

(5) If a credit bureau determines that disputed information is inaccurate or incorrect and such information was used in determining an insurance score which resulted in a denial, cancellation or nonrenewal of or higher premiums or less favorable policy terms for a consumer, the insurer shall, within thirty (30) days of receiving notice of correction, reissue or re-rate the policy by refunding the amount of the overpayment of premium based on the corrected insurance score retroactive to the shorter of the last twelve (12) months of coverage or the actual period of coverage. An "insurance score" as used in this section shall be defined as 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 history.

Agents shall be held harmless by insurers for all acts, efforts and disclosures in obtaining an insurance score on the insurer's behalf. The commissioner is authorized and empowered to establish rules and regulations to carry out the provisions of this section and to fulfill the goals of this act.

SECTION 3. Chapter 27-9 of the General Laws entitled "Casualty Insurance Rating" is hereby amended by adding thereto the following section:

27-9-56. Use of credit rating. -- An insurer may use insurance scoring for rating and underwriting policies of personal motor vehicle insurance only under the following conditions:

(1) The insurer demonstrates the predictive nature of their insurance score to the insurance division.

(2) An insurer shall, once every two (2) years if requested by an existing customer, obtain an updated insurance score for the customer. If, after obtaining the insurance score, the customer has improved his, her or its credit rating, the user of the information shall afford the customer any decrease in rates that are available due to the improved rating. The user may not increase the rate of an existing customer based solely on a worsening in the customer's insurance score unless: (i) the worsening is due to a bankruptcy, tax lien, garnishment, foreclosure or judgment; or (ii) if a subsequent insurance score no sooner than six (6) months later confirms the worsening in score.

(3) An insurer shall not decline insurance for a new customer based solely on an insurance score, or absence of an insurance score; and an insurer shall not cancel, nonrenew or increase the rate of an existing customer based solely on a worsening in a customer's insurance score unless: (i) the worsening is due to a bankruptcy, tax lien, garnishment, foreclosure or judgment; or (ii) if a subsequent insurance score no sooner than six (6) months later confirms the worsening in score.

(4) No insurer is obligated to obtain a current credit report or insurance score for an insured if: the insured is in the most favorably-priced tier of the insurer, within a group of affiliated insurers; or credit was not used for such insured when the policy was initially written. However, the insurer shall have the discretion to use credit for such insured upon renewal, if consistent with its underwriting guidelines. The user may not increase the rate of an existing customer based solely on a worsening in the customer's insurance score unless: (i) the worsening is due to a bankruptcy, tax lien, garnishment, foreclosure or judgment; or (ii) if a subsequent insurance score no sooner than six (6) months later confirms the worsening in score.

>(5) If a credit bureau determines that disputed information is inaccurate or incorrect and such information was used in determining an insurance score which resulted in a denial, cancellation or nonrenewal of or higher premiums or less favorable policy terms for a consumer, the insurer shall, within thirty (30) days of receiving notice of correction, reissue or re-rate the policy by refunding the amount of the overpayment of premium based on the corrected insurance score retroactive to the shorter of the last twelve (12) months of coverage or the actual period of coverage. An "insurance score" as used in this section shall be defined as 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 history.

Agents shall be held harmless by insurers for all acts, efforts and disclosures in obtaining an insurance score on the insurer's behalf. The commissioner is authorized and empowered to establish rules and regulations to carry out the provisions of this section and to fulfill the goals of this act.

SECTION 4. This act shall take effect on January 1, 2003.