Section 1 Short title
This Act may be cited as the “Prohibit Auto Insurance Discrimination Act”.
Prohibit Auto Insurance Discrimination Act
A BILL
To prohibit private passenger automobile insurers from using certain income proxies to determine insurance rates and eligibility.
Sec. 2 Findings
Congress finds the following:
Private passenger automobile insurance companies are institutions which help spread risk of loss over a collective group of policyholders.
Private passenger automobile insurance is mandated in all States but New Hampshire. Legal penalties for operating a vehicle without liability insurance in these States range from fines, to license suspensions or revocations, to imprisonment.
The private passenger automobile insurance industry uses different variables to predict the overall costs and risks of drivers. The analysis and use of these variables ultimately help the automobile insurer set premium rates charged to consumers which the automobile insurer determines to be actuarially supported.
A pure loss ratio, a measurement of profitability in insurance, is defined as losses divided by premiums. Statistical correlations between certain variables and pure loss ratios should be interpreted to mean that the selected variable relates to profitability, but not necessarily to the risk that an individual will get into an automobile accident.
A growing trend in the private passenger automobile insurance industry is to use income proxies for underwriting and rating. The use of income proxies such as a driver’s education level, occupation, employment status, home ownership status, credit score, consumer report, previous insurer, and prior purchase of insurance by the industry as variables that significantly influence the insurance premiums charged to drivers has become commonplace. Use of these income proxies in this fashion results in higher rates being charged to lower income drivers while lower rates are being charged to the more affluent driver.
The American public is largely unaware that a person’s education level, occupation, employment status, home ownership status, credit score, consumer report, zip code, census tract, previous insurer, and prior purchase of insurance may be significant factors used to determine eligibility for preferred auto insurance rates regardless of the person’s driving history. As a result of the individual’s ineligibility for preferred rates, the driver’s policy and rate will be only offered from an affiliate company that has higher rates.
Sec. 3 Requirements for private passenger automobile insurers
Use of certain factors and income proxies prohibited— It shall be unlawful for a private passenger automobile insurer, or any of its affiliate insurers, to take into consideration any of the factors described in subsection (b) relating to a consumer in determining that consumer’s eligibility for automobile insurance or in calculating the rate for that consumer.
Factors— The factors referred to in subsection (a) are—
gender;
level of education;
occupation;
employment status;
home ownership status;
zip code or adjacent zip codes;
census tract;
marital status;
credit score or credit-based insurance score;
consumer report;
previous insurer; or
prior purchase of insurance of a consumer from that automobile insurer.
Public availability of information— All underwriting rules and rate filings for use by any private passenger automobile insurer shall be available for public inspection and may not be considered proprietary trade secret information.
Reasonable procedures To assure compliance— No person shall be held liable for any violation of this Act if the person shows by a preponderance of the evidence that at the time of the alleged violation the person maintained reasonable procedures to assure compliance with the provisions of this Act.
Rules of construction—
Factors and methods influencing premiums— For the purposes of this Act, a violation of subsection (a) shall be considered to have occurred whenever the consideration of any of the factors described in subsection (b) prevents the consumer from obtaining insurance at the lowest rate available to the consumer from a private passenger automobile insurer or any of its affiliates. Actions considered a violation of such subsection include the usage or consideration of any such factor resulting in—
the determination of a consumer’s eligibility for automobile insurance or the calculation of the rate for that consumer;
an action which prevents a consumer from receiving certain rebates or discounts;
an action which prevents a consumer from obtaining insurance from an automobile insurer or any of its affiliate companies;
a denial, cancellation, non-renewal, or change in policy or coverage terms; or
any other impact on a consumer’s premium for insurance.
Authority of Federal and State agencies— Nothing in this Act is intended to affect the authority of any Federal or State agency to enforce a prohibition against unfair or deceptive acts or practices, including the making of false or misleading statements in connection with a credit or insurance transaction that is not initiated by the consumer.
Sec. 4 Enforcement
Enforcement by Federal Trade Commission—
Unfair or deceptive acts or practices— A violation of this Act shall be treated as an unfair and deceptive act or practice proscribed under section 5 of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)).
Powers of Commission— The Federal Trade Commission shall enforce this Act in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made a part of this Act. Any person who violates this Act shall be subject to the penalties and entitled to the privileges and immunities provided in the Federal Trade Commission Act.
Amount of penalty— Notwithstanding the penalties set forth in section 5 of such Act, a person who violates this Act shall be liable for a civil penalty of not less than $2,500 per violation.
Regulations— The Federal Trade Commission shall prescribe, in accordance with section 553 of title 5, United States Code, such regulations as are necessary to carry out the purposes of this Act, including regulations as may be necessary or appropriate to administer and carry out the purposes and objectives of this Act, and to prevent evasions thereof or to facilitate compliance therewith.
Actions by consumers—
Willful violations— Any private passenger automobile insurer who willfully violates this Act with respect to any consumer is liable to that consumer in an amount equal to the sum of—
any actual damages sustained by the consumer as a result of the failure;
such amount of punitive damages as the court may allow; and
in the case of any successful action to enforce any liability under this paragraph, the costs of the action together with reasonable attorneys’ fees as determined by the court.
Negligent violations— Any private passenger automobile insurer who is negligent in failing to comply with any requirement imposed under this Act with respect to any consumer is liable to that consumer in an amount equal to the sum of—
any actual damages sustained by the consumer as a result of the failure; and
in the case of any successful action to enforce any liability under this paragraph, the costs of the action together with reasonable attorneys’ fees as determined by the court.
Attorneys’ fees— Upon a finding by the court that an unsuccessful pleading, motion, or other paper filed in connection with an action under this subsection was filed in bad faith or for purposes of harassment, the court shall award to the prevailing party attorney’s fees reasonable in relation to the work expended in responding to the pleading, motion, or other paper.
Jurisdiction of courts; limitation of actions— An action to enforce any liability created under this subsection may be brought in any appropriate United States district court, without regard to the amount in controversy, or in any other court of competent jurisdiction, not later than the earlier of—
2 years after the date of discovery by the plaintiff of the violation that is the basis for such liability; or
5 years after the date on which the violation that is the basis for such liability occurs.
Actions by States—
In general— In any case in which the attorney general of a State, or an official or agency of a State, has reason to believe that an interest of the residents of such State has been or is threatened or adversely affected by an act or practice in violation of this Act, the State, as parens patriae, may bring a civil action on behalf of the residents of the State in an appropriate State court or an appropriate district court of the United States to—
enjoin such act or practice;
enforce compliance with this Act;
obtain damages, restitution, or other compensation on behalf of residents of the State; or
obtain such other legal and equitable relief as the court may consider to be appropriate.
Notice— Before filing an action under this subsection, the attorney general, official, or agency of the State involved shall provide to the Federal Trade Commission a written notice of such action and a copy of the complaint for such action. If the attorney general, official, or agency determines that it is not feasible to provide the notice described in this paragraph before the filing of the action, the attorney general, official, or agency shall provide written notice of the action and a copy of the complaint to the Federal Trade Commission immediately upon the filing of the action.
Authority of Federal Trade Commission— On receiving notice under paragraph (2) of an action under this subsection, the Federal Trade Commission shall have the right—
to intervene in the action;
upon so intervening, to be heard on all matters arising therein; and
to file petitions for appeal.
Rule of construction— For purposes of bringing a civil action under this subsection, nothing in this Act shall be construed to prevent an attorney general, official, or agency of a State from exercising the powers conferred on the attorney general, official, or agency by the laws of such State to conduct investigations, administer oaths and affirmations, or compel the attendance of witnesses or the production of documentary and other evidence.
Sec. 5 Relation to State law
This Act does not annul, alter, affect, or exempt any person subject to the provisions of this Act from complying with the laws of any State with respect to the collection, distribution, or use of any information on consumers, the prevention or mitigation of identity theft, or the regulation of the business of insurance, except to the extent that those laws are inconsistent with any provision of this Act, and then only to the extent of the inconsistency.
Sec. 6 Definitions
For the purposes of this Act, the following definitions apply:
Affiliate— The term affiliate means an entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another entity. For purposes of this paragraph, the term control means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the entity, whether—
through the ownership of voting securities;
by contract other than a commercial contract for goods or non-management services;
by contract for goods or non-management services where the volume of activity results in a reliance relationship; or
by common management.
Automobile insurer— The term automobile insurer means an insurer authorized to transact or transacting automobile insurance, motor vehicle insurance, automobile or motor vehicle liability insurance, or any similar insurance business in the United States.
Census tract— The term census tract means any small, relatively permanent statistical subdivision of a county, as used by the United States Census Bureau.
Consumer report— The term consumer report has the meaning given such term in section 603 of the Fair Credit Reporting Act (15 U.S.C. 1681a), except that such term does not include any communication to the extent such communication relates to the driving history or place of residence of a consumer.
Credit-based insurance score— The term credit-based insurance score means a rating based in whole or in part on a consumer's credit information used in underwriting and rating of consumers that takes into account certain elements of an individual’s credit history to predict how likely such individual is to have an insurance loss.
Credit score— The term credit score has the meaning given such term in section 609(f)(2) of the Fair Credit Reporting Act (15 U.S.C. 1681g(f)(2)).
Employment status— The term employment status means a consumer’s status as a current full-time employee, part-time employee, employed, unemployed, underemployed, or any other such designation which indicates a consumer’s work status.
Home ownership status— The term home ownership status refers to whether a consumer currently owns any real property which may be used as a residence.
Level of education— The term level of education refers to the highest grade level completed in a secondary school or trade school, a professional licensure or certification, or the highest undergraduate or graduate college degree obtained. Such term does not include the completion of a traffic safety course or scholastic achievement while enrolled in a school, college, or university.
Occupation— The term occupation means a consumer’s current lawful employment position in a career or identifiable trade category.
Private passenger automobile— The term private passenger automobile means a 4-wheel motor vehicle, whether owned or leased to an individual or individuals, and that is of a private passenger or station wagon type, or that is a motor vehicle with a pickup body, a delivery sedan, a passenger van, a sports utility vehicle, or a panel truck or a camper type vehicle, and that—
is not used as a public or livery conveyance for passengers;
is not rented to others;
has a gross vehicle weight of less than 15,000 pounds; and
is not primarily used in the course of an occupation, profession, or business of a person other than farming or ranching.
Sec. 7 Effective date
This Act shall take effect 1 year after the date of enactment of this Act.