Senate Bill 260, passed in the 2003 Legislative Session, imposed limits on an insurer's use
of credit history or insurance scoring for certain types of personal insurance. It allowed insurers
to use a consumer's credit information only when issuing new personal insurance policies. If
an insurer assigned a consumer to a less favorable rating category for a personal insurance policy
based on the use of the consumer's credit information, that consumer could request a rerating
of that policy no more than once annually. Senate Bill 377 (SB 377), passed in the 2009 Legislative
Session, expanded the rights of a consumer to request rerating of a personal insurance policy
and provided additional consumer protections. In particular, the results of a rerating can only
be used by an insurer to reduce a consumer's premiums.
Questions have been raised regarding the interpretation of certain provisions in sections (2)(a)
and (2)(b) of SB 377. This bulletin is intended to provide guidance to insurers about the Insurance
Division's interpretation of these provisions.
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Question: Does the language in ORS 746.661(2)(a) allow a consumer to request a rerating when
their insurance policy premiums were initially determined without consideration of the consumer's
credit information?
Answer: No. ORS 746.661(2)(a) provides:
If an insurer uses the consumer's credit history or insurance score at any time in the rating
of a personal insurance policy, the consumer may request, no more than once per insurer per policy
line annually, that the insurer rerate the consumer according to the standards that the insurer
would apply if the consumer were initially applying for the same insurance policy.
If an insurer ever used a specific consumer's credit history
or insurance score in the rating of a specific personal insurance policy, that consumer may
request rerating of that personal insurance policy no more than once per insurer per policy
line annually. That specific policy qualifies for rerating even if the insurer no longer
uses credit history or insurance score to determine that policy's rates or if the insurer
no longer uses a rating plan for new policies that includes credit information. An
insurer is not required to rerate a policy under ORS 746.661(2)(a) where credit information
was never used in the initial rating of that policy.
For example, Joe is a policyholder with ABC insurer and has had an automobile insurance policy
with them for 15 years. ABC insurer started using a credit rating plan 10 years ago. If Joe requests
a rerate, ABC insurer would NOT have to rerate this policy because Joe's automobile policy was
never rated using credit information. On the other hand, if Joe purchased an automobile policy
from ABC insurer in 2006, then ABC insurer would have to rerate Joe's automobile policy upon
his request. Even if ABC insurer moved Joe's automobile policy to a renewal rating plan that
did not use credit information in 2009, ABC insurer would have to rerate Joe's automobile policy
upon his request.
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Question: What do the terms "policy line" in ORS 746.661(2)(a) and "related policy
line" in ORS 746.661(2)(b)) mean?
Answer: The terms "policy line" and
"related policy line" mean insurance products that serve the same or very similar
purposes and which indemnify similar risks. The requirements in ORS 746.661 pertain
to "personal insurance", i.e., those products or services that are used primarily
for personal, family or household purposes. (See the definition of "personal
insurance" in ORS 746.600(33).) For example, all personal insurance policies for private
passenger automobiles would be considered a related policy line. Personal insurance policies
for homeowners may include other coverage such as condominium owners in the related policy
line.
The "standards that an insurer would apply if the consumer
were initially applying for the same insurance policy" language (and "if the consumer
were applying for a new policy" language in ORS 746.661(2)(b)) means the insurer
would rerate a policy based on the rating plan that would be used if the consumer were applying
for a new policy.
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Question: If an insurer rerates a policy at the consumer's request under ORS 746.661(2)(a) that
results in reduced premiums, must "affiliates" of that insurer rerate other personal
insurance policies in the related policy line issued by the affiliate to the consumer?
Answer: No. ORS 746.600(25) defines "insurer" by reference to ORS 731.106, which defines
insurance as "every person engaged in the business of entering into policies of insurance."
A "person" means an individual or business entity (ORS 731.116). Each insurer is a
separate business entity.
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Question: Does the language in ORS 746.661(2)(b) require an insurer to rerate all the other policies
in the related policy line (once the requirements of ORS 746.661(2)(a) have been met) whether
or not credit information was used in the initial rating of the other policies?
Answer: Yes, with one exception. ORS 746.661(2)(b) provides:
The insurer shall rerate the consumer within 30 days
after receiving a request from the consumer. After rerating the consumer based upon the request,
the insurer may not use credit information from rerating to increase the premium on any personal
insurance policy the consumer holds. If the consumer qualifies for a more favorable rating
category, the insurer shall reduce the premiums on all the personal insurance policies the
consumer holds in the related policy line for which the consumer's credit history and insurance
score would entitle the consumer to lower premiums if the consumer were applying for a new
policy. The effective date of any rate change is the date of the consumer's request.
If the consumer qualifies for a more favorable rating category
after the insurer rerates a specific policy under ORS 746.661(2)(a), the insurer
must rerate all of the consumer's policies written by that insurer in the related policy
line and reduce premiums on those policies for which the consumer's credit history or insurance
score would entitle the consumer to lower premiums if they were applying for a new policy.
This may require the insurer to rerate policies where credit information was never used in
the initial rating of the policy. The insurer is prohibited from using credit information
from rerating to increase premiums on any personal insurance policies the consumer holds.
For example, if Joe requests a rerate of one of his automobile
policies that was initially rated with credit information, ABC insurer would have to rerate
his policy as if it was a new policy. In addition, if Joe qualifies for a reduction in premiums
on that policy, ABC insurer would have to rerate all of Joe's other automobile policies (whether
or not credit information was ever used in the initial rating of those policies) and then
reduce premiums if some or all of those policies qualify for reduced premiums.
However, if an insurer no longer uses a credit rating
plan for new policies, then a consumer's credit information would never "entitle the
consumer to lower premiums if they were applying for a new policy." In this situation,
an insurer would not be required to rerate all of the consumer's policies in the related
policy line pursuant to ORS 746.661(2)(b).
The amendments to ORS 746.661 apply to personal insurance policies issued or renewed on or after
January 1, 2010.
This bulletin is dated the 4th of May 2010, at Salem, Oregon.
