Reflecting On and Projecting Compliance Issues

Along the same lines, Georgia's Directive 11-EX-2 was issued to clarify the proper use of certificates of insurance in that state. This latest directive serves as a reminder that every certificate of insurance, except automobile liability insurance cards, is to include the following statement, or a substantially similar one, printed conspicuously and in no smaller than 10 point font, boldfaced type:

"This document is issued as a matter of information only and confers no rights upon the document holder. This document does not amend, extend, or alter the coverage, terms, exclusions, conditions, or other provisions afforded by the policies referenced herein."

Apart from the required language above, the directive also indicates that insurers are to provide those individuals authorized with clear procedures regarding their authority to issue certificates in Georgia, further noting that such procedures are to be made available to the Department of Insurance upon request.

Credit Information

Consumer protection remains a focus in many states, with both regulatory and legislative attempts to further restrict the use of credit information by insurers.

A prime example is Rhode Island's recent adoption of Regulation 116, entitled "Use of Credit – Extraordinary Life Events and Insufficient Credit," which takes effect July 1, 2011. It establishes guidelines regarding the use of insurance scores in underwriting and rating of homeowners' and/or private passenger automobile insurance when a consumer experiences an extraordinary life event. It also addresses requirements for insurers when there is an absence of or insufficient credit history for an applicant or insured.

On the legislative side, recently introduced bills in Mississippi, Montana, Ohio, Pennsylvania, South Carolina, Texas, and West Virginia also reflect the ongoing "hot topic" nature of credit reports and personal lines insurance:

• Mississippi's SB 2674 would prohibit an insurer from requiring a particular payment plan for an insured under a private passenger or homeowner's insurance policy based on the insured's credit history, as well as from using credit information in determining rating or eligibility for coverage.
• Montana currently has two bills on credit scoring, HB 29 and SB 137, which address extraordinary life circumstances in personal lines underwriting and the use of credit information in automobile insurance rating and coverage eligibility, respectively.
• Ohio's HB 615 proposes prohibitions on insurers' use of credit scores, credit histories, or credit reports in rating or underwriting.
• Pennsylvania's SB 126 would prohibit an insurer from denying, canceling, or refusing to renew personal insurance due in whole or in part to an insured's credit history.
• In South Carolina two introduced bills, HB 3101 and SB 85, look to establish prohibitions on the use of credit reports in rating and underwriting.
• Texas' HB 194 seeks to prohibit an insurer from rating a risk based wholly or partly on the credit information, credit reports, or credit scores.
• Finally, West Virginia's HB 2049 seeks to prohibit the use of a person's credit history in insurance transactions. Additionally, its HB 2319 would prohibit the use of credit scores in casualty rate filings. A third bill, HB 2467, would not only prohibit the use of credit scoring as a rating factor in homeowners' or automobile liability policies, but also prohibit declinations of automobile insurance if based, in any part, upon the number of inquiries reflected in a credit report, credit score report, or CLUE report, or upon any information contained in any of these reports, if the accuracy is disputed by the applicant.

Other proposals designed to further assist consumers, with potential effects on insurers' underwriting processes, include Connecticut's SB 168, which would prohibit property and casualty insurers from assessing late fees on policyholders who make late premium payments.

Regarding another premium payment-related issue, New Jersey's AB 3509 and SB 2432 both seek a requirement for insurers to allow payment of homeowners' insurance premiums in monthly installments. 

The year is still young, with many more legislative bills to be introduced and debated in the various states and ongoing regulatory action and departmental guidance documents to be adopted and issued. Given this brief glimpse into some basic underwriting areas of concern, we will most likely continue to see an increase in the inventory level of proposals with potential impact on property and casualty insurers' operations.