TCAIS Urges Stronger Consumer Protections on Credit Use by Insurers in Texas

Insurance protects consumers by letting them share the financial risk of owning a home or driving a car. So, in order for insurance to work, insurers must be able to assess the risk of potential and current policyholders. Risk-assessment tools help insurers fairly determine a premium that reflects the risk presented by each customer.

Most homeowners and auto insurance companies use limited credit information to help assess insurance risk, as it has been proven to be one of the key factors for predicting potential for filing claims. To strengthen consumer protections regarding the use of credit information by insurers, the Texas Coalition for Affordable Insurance Solutions (TCAIS) endorses the following principles for regulation in Texas:

1. Notification of credit information use
   Require insurers to notify consumers that credit information is used by the company to help assess risk.
   
2. Explanation of denial, cancellation or premium increases
   Require insurers to:
   • provide applicants an explanation of why they were not offered coverage if due to credit; and
   • provide existing customers written statement of reason, upon request, explaining why they received a premium increase or cancellation notice if due to credit.
   
3. Prohibition of credit as the “sole basis”
   Prohibit insurers from using credit information as the sole basis for denying, canceling or not renewing a home or auto insurance policy.
   
4. No penalty for limited credit history
   Protect those who have little or no credit history by limiting how insurers use a lack of credit history as a determining factor in denying coverage.
   
5. Restrictions on types of credit information used
   Prohibit insurers from using certain credit information — such as medical collection information and disputed information under investigation by a credit bureau — to help assess risk.
   
6. Reevaluation of credit report errors
   Require insurers to reevaluate policyholders at their request if they discover errors on their credit report.
   
7. Accurate and timely review of credit information
   Require insurers that use credit on renewal to reassess consumers’ credit information periodically and, when necessary, adjust their premiums accordingly.