Sec. 482-1-127-.05 - Requirements

§ 482-1-127-.05. Requirements

(1) Insurers must maintain and make available upon request by the Department specific written procedures detailing their practices regarding credit history and insurance scores, including the following information:

(a) When credit history will be ordered and when insurance scores will be ordered or calculated, e.g. at initial underwriting, upon applicant's request, etc.

(b) About whom such information will be ordered or calculated, e.g. the named applicant, all known household members, etc.

(c) How such information will be used, e.g. to calculate rates, to determine eligibility for coverage, etc.

(2) If the insurer relies, in whole or in part, on an insurance score to initially underwrite or rate any applicant or re-rate any existing class or subclass of insureds, or offer insurance pursuant to 15 U.S.C. 1681c, the insurer shall, before its use on any applicant risk:

(a) File the insurance scoring model with the Commissioner. A Third Party may file scoring models on behalf of personal lines insurers licensed to do business in this state. This filing shall include the factors or characteristics from an applicant's credit history that are utilized in determining an insurance score, and the algorithm, computer program, model, or other process used in determining an insurance score. The underlying support, including statistical validation, for the development of the algorithm, computer program, model, or other process that is used in determining a insurance score shall also be filed;

(b) Maintain the following forms and make available upon request by the Department:

1. Any language provided to the applicant to advise them that credit report information will be ordered; and

2. The adverse action form.

(3) If an applicant is eligible for a particular rate or tier, based on all other criteria, except for the fact that an applicant's credit history is unavailable ("no-hit") or incomplete ("thin file") for that applicant, the applicant will be given that rate or tier unless said insurer files and the Department concurs with actuarial documentation which supports other practices. The actuarial documentation shall include age segmentation as well as other reasonable criteria.

(4) If a credit reporting agency determines that the credit history of an applicant is incorrect due to inaccurate information and if the insurer receives notice and documentation of this determination from the consumer reporting agency, the insurer shall within 30 days after receiving notice:

(a) Re-underwrite the applicant;

(b) Re-rate the consumer; and

(c) Adjust the premium as indicated in Paragraph (5) below.

(5) If it is determined by the re-underwriting or re-rating in accordance with the Paragraph (4) above that the applicant has overpaid the premium, the insurer shall refund or credit to the applicant the amount of the overpayment of premium. Such payment shall be calculated back to the shorter of either the last 12 months or the date of the error.

(6) Any filing relating to credit information is considered to be a commercially valuable trade secret and proprietary information of the entity filing the information. The Department, absent a court order, will not release information that is filed on a proprietary basis. Any proprietary information shall be submitted under separate cover and must clearly state the desires of the party filing the information as to its confidentiality.

Author: Commissioner of Insurance

(New Rule: May 21, 2003, effective June 7, 2003. Filed with LRS May 28, 2003. Rule is not subject to the Alabama Administrative Procedure Act.)

Statutory Authority: Code of Ala. 1975, § 27-2-17.

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