Md. Code Regs. 31.15.11.09

Current through Register Vol. 51, No. 10, May 17, 2024

Section 31.15.11.09 - Private Passenger Motor Vehicle Insurance - Use of Credit History for Rating

A. Scope. This regulation applies to an insurer that rates a new policy of private passenger motor vehicle insurance based wholly or partly on the credit history of an applicant.

B. In General.

(1) If an insurer uses credit criteria or a credit score as part of the insurer's rate-making standards, the credit criteria or credit score shall be established and used in a manner that:

(a) Does not result in rates that are excessive, inadequate, or unfairly discriminatory;

(b) Results in application of the most favorable rate modification for which an applicant qualifies;

(c) Results in placement of an applicant in the most favorably priced tier or other classification for which the applicant qualifies;

(d) Results in placement of an applicant in the most favorably priced insurer within a group of affiliated insurers for which the applicant qualifies; and

(e) Otherwise complies with Insurance Article, § 11-306, Annotated Code of Maryland.

(2) If an insurer calculates a premium based wholly or partly on information contained in a credit report, credit score, or other credit history that the insurer knows is inaccurate or incomplete, the resulting rate is deemed to be:

(a) Excessive, inadequate, or unfairly discriminatory; and

(b) In violation of this regulation.

C. Prohibited Factors.

(1) An insurer that rates a new policy wholly or partly on the credit history of an applicant may not use the following factors in rating the policy:

(a) A factor on the credit history of the applicant that occurred more than 5 years prior to the issuance of the new policy;

(b) The absence of credit history or the inability to determine the applicant's credit history; or

(c) The number, age, or other characteristics of credit inquiries about an applicant's credit history.

(2) With respect to a new policy, the 5-year limit under §C(1)(a) of this regulation shall be measured from the date of issuance of the policy, and may not be measured from the date that the insurer checks the credit history of the applicant.

(3) After the initial rating of a policy, the 5-year limit under §C(1)(a) of this regulation shall be measured from the next renewal date of the policy, and may not be measured from the date that the insurer checks the credit history of the insured.

D. Limitation on Rating Based on Credit History.

(1) An insurer that rates a new policy based wholly or partly on the credit history of an applicant may, if actuarially justified, provide a credit-based discount or impose a credit-based surcharge.

(2) If a group of affiliated insurers uses credit history wholly or partly as an eligibility factor for placement of an applicant with a particular affiliated insurer:

(a) The refusal of an affiliated insurer to accept an applicant based wholly or partly on credit history may not be considered a refusal to underwrite based wholly or partly on credit history if at least one affiliated insurer within the group accepts the applicant; and

(b) The group of affiliated insurers is deemed a single insurer for purposes of measuring whether a credit-based discount or credit-based surcharge is within the 40 percent limitation on rate modifications under Insurance Article, § 27-501(e-1)(5), Annotated Code of Maryland.

E. Notice of Adverse Action. If an insurer does not give an applicant the best available rate or discount due wholly or partly to information from the credit report of the applicant, the insurer shall:

(1) Provide to the applicant orally, in writing, or electronically:

(a) The name, address, and telephone number of the consumer reporting agency that furnished the credit report to the insurer;

(b) If the consumer reporting agency compiles and maintains files on consumers on a nationwide basis, a toll-free telephone number established by the consumer reporting agency; and

(c) A statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the applicant the specific reasons why the adverse action was taken; and

(2) Provide to the applicant an oral, written, or electronic notice of the applicant's right:

(a) To obtain, under § 1681j of the federal Fair Credit Reporting Act, a free copy of a credit report on the applicant from the consumer reporting agency within 60 days after receipt of the notice; and

(b) To dispute, under § 1681i of the federal Fair Credit Reporting Act, with a consumer reporting agency the accuracy or completeness of any information in a credit report furnished by the agency.

Md. Code Regs. 31.15.11.09