Fla. Governor Signs Law Limiting Use of Credit Reports

Florida’s Chief Financial Officer Tom Gallagher announced that a new law has hit the books that will limit the use of credit reports and credit scores by insurance companies that sell homeowners and auto insurance. Senate Bill 40-A, signed into law by Gov. Jeb Bush, will prohibit insurers from using a person’s credit history against them if they are dealing with unexpected medical bills or the death of a spouse. It will also prohibit insurers from denying coverage or raising rates based solely on a credit report or score.

“When credit history plays a role in a consumer’s ability to obtain and maintain insurance coverage, extenuating circumstances should not be used against them,” Gallagher said.

An increasing number of insurers are using credit information when deciding how much consumers should pay for insurance coverage. Of the top ten writers of homeowners insurance, half consider credit information in underwriting. Nine of the top ten writers of automobile insurance also consider credit information in underwriting.

Gallagher appointed a task force in the fall of 2001 to examine the insurance industry’s use of credit reports when underwriting and rating automobile and homeowners insurance policies. After four public hearings around the state, task force members made a series of recommendations, several of which are included in the new law.

The new law, effective January 1, 2004, requires insurance companies to notify an applicant or an insured if their credit report is being requested for underwriting or rating purposes. If credit history played a role in an insurance company’s decision to deny coverage or raise an insured’s rates, insurers must inform the consumer and provide them with a copy of their credit report. If a consumer is adversely impacted by the use of a credit report, insurers will have to re-evaluate the insured’s credit history every two years.

Insurance companies will also be prohibited from denying coverage or raising an insured’s rates based, in whole or in part, on any of the following factors: the absence of or insufficient credit history, past due medical bills or place of residence.

SB 40-A was sponsored by Sen. Les Miller from Tampa. Rep. David Rivera from Miami sponsored the House version.