PAID Act

I 117TH CONGRESS 1ST SESSION H. R. 1270 To prohibit private passenger automobile insurers from using certain income proxies to determine insurance rates and eligibility. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 23, 2021 Mrs. WATSON COLEMAN (for herself, Ms. TLAIB, Mr. TAKANO, Mr. THOMP- SON of Mississippi, Mrs. HAYES, Mr. JONES, Ms. OCASIO-CORTEZ, Mr. GARCI´A of Illinois, Ms. LEE of California, Ms. NORTON, Mr. BISHOP of Georgia, and Mr. HASTINGS) introduced the following bill; which was re- ferred to the Committee on Financial Services, and in addition to the Committee on Energy and Commerce, for a period to be subsequently de- termined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To prohibit private passenger automobile insurers from using certain income proxies to determine insurance rates and eligibility. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Prohibit Auto Insur- 4 ance Discrimination Act’’ or the ‘‘PAID Act’’. 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 1270 IH (1) Private passenger automobile insurance 1 companies are institutions which help spread risk of 2 loss over a collective group of policyholders. 3 (2) Private passenger automobile insurance is 4 mandated in all States but New Hampshire. Legal 5 penalties for operating a vehicle without liability in- 6 surance in these States range from fines, to license 7 suspensions or revocations, to imprisonment. 8 (3) The private passenger automobile insurance 9 industry uses different variables to predict the over- 10 all costs and risks of drivers. The analysis and use 11 of these variables ultimately help the automobile in- 12 surer set premium rates charged to consumers which 13 the automobile insurer determines to be actuarially 14 supported. 15 (4) A pure loss ratio, a measurement of profit- 16 ability in insurance, is defined as losses divided by 17 premiums. Statistical correlations between certain 18 variables and pure loss ratios should be interpreted 19 to mean that the selected variable relates to profit- 20 ability, but not necessarily to the risk that an indi- 21 vidual will get into an automobile accident. 22 (5) A growing trend in the private passenger 23 automobile insurance industry is to use income prox- 24 ies for underwriting and rating. The use of income 25 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 1270 IH proxies such as a driver’s education level, occupa- 1 tion, employment status, home ownership status, 2 credit score, consumer report, previous insurer, and 3 prior purchase of insurance by the industry as vari- 4 ables that significantly influence the insurance pre- 5 miums charged to drivers has become commonplace. 6 Use of these income proxies in this fashion results 7 in higher rates being charged to lower income driv- 8 ers while lower rates are being charged to the more 9 affluent driver. 10 (6) The American public is largely unaware 11 that a person’s education level, occupation, employ- 12 ment status, home ownership status, credit score, 13 consumer report, zip code, census tract, previous in- 14 surer, and prior purchase of insurance may be sig- 15 nificant factors used to determine eligibility for pre- 16 ferred auto insurance rates regardless of the per- 17 son’s driving history. As a result of the individual’s 18 ineligibility for preferred rates, the driver’s policy 19 and rate will be only offered from an affiliate com- 20 pany that has higher rates. 21 SEC. 3. REQUIREMENTS FOR PRIVATE PASSENGER AUTO- 22 MOBILE INSURERS. 23 (a) USE OF CERTAIN FACTORS AND INCOME PROX- 24 IES PROHIBITED.—It shall be unlawful for a private pas- 25 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 1270 IH senger automobile insurer, or any of its affiliate insurers, 1 to take into consideration any of the factors described in 2 subsection (b) relating to a consumer in determining that 3 consumer’s eligibility for automobile insurance or in calcu- 4 lating the rate for that consumer. 5 (b) FACTORS.—The factors referred to in subsection 6 (a) are— 7 (1) gender; 8 (2) level of education; 9 (3) occupation; 10 (4) employment status; 11 (5) home ownership status; 12 (6) zip code or adjacent zip codes; 13 (7) census tract; 14 (8) marital status; 15 (9) credit score or credit-based insurance score; 16 (10) consumer report; 17 (11) previous insurer; or 18 (12) prior purchase of insurance of a consumer 19 from that automobile insurer. 20 (c) PUBLIC AVAILABILITY OF INFORMATION.—All 21 underwriting rules and rate filings for use by any private 22 passenger automobile insurer shall be available for public 23 inspection and may not be considered proprietary trade 24 secret information. 25 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 1270 IH (d) REASONABLE PROCEDURES TO ASSURE COMPLI- 1 ANCE.—No person shall be held liable for any violation 2 of this Act if the person shows by a preponderance of the 3 evidence that at the time of the alleged violation the per- 4 son maintained reasonable procedures to assure compli- 5 ance with the provisions of this Act. 6 (e) RULES OF CONSTRUCTION.— 7 (1) FACTORS AND METHODS INFLUENCING 8 PREMIUMS.—For the purposes of this Act, a viola- 9 tion of subsection (a) shall be considered to have oc- 10 curred whenever the consideration of any of the fac- 11 tors described in subsection (b) prevents the con- 12 sumer from obtaining insurance at the lowest rate 13 available to the consumer from a private passenger 14 automobile insurer or any of its affiliates. Actions 15 considered a violation of such subsection include the 16 usage or consideration of any such factor resulting 17 in— 18 (A) the determination of a consumer’s eli- 19 gibility for automobile insurance or the calcula- 20 tion of the rate for that consumer; 21 (B) an action which prevents a consumer 22 from receiving certain rebates or discounts; 23 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 1270 IH (C) an action which prevents a consumer 1 from obtaining insurance from an automobile 2 insurer or any of its affiliate companies; 3 (D) a denial, cancellation, non-renewal, or 4 change in policy or coverage terms; or 5 (E) any other impact on a consumer’s pre- 6 mium for insurance. 7 (2) AUTHORITY OF FEDERAL AND STATE AGEN- 8 CIES.—Nothing in this Act is intended to affect the 9 authority of any Federal or State agency to enforce 10 a prohibition against unfair or deceptive acts or 11 practices, including the making of false or mis- 12 leading statements in connection with a credit or in- 13 surance transaction that is not initiated by the con- 14 sumer. 15 SEC. 4. ENFORCEMENT. 16 (a) ENFORCEMENT BY FEDERAL TRADE COMMIS- 17 SION.— 18 (1) UNFAIR OR DECEPTIVE ACTS OR PRAC- 19 TICES.—A violation of this Act shall be treated as 20 an unfair and deceptive act or practice proscribed 21 under section 5 of the Federal Trade Commission 22 Act (15 U.S.C. 57a(a)(1)(B)). 23 (2) POWERS OF COMMISSION.—The Federal 24 Trade Commission shall enforce this Act in the same 25 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 1270 IH manner, by the same means, and with the same ju- 1 risdiction, powers, and duties as though all applica- 2 ble terms and provisions of the Federal Trade Com- 3 mission Act (15 U.S.C. 41 et seq.) were incor- 4 porated into and made a part of this Act. Any per- 5 son who violates this Act shall be subject to the pen- 6 alties and entitled to the privileges and immunities 7 provided in the Federal Trade Commission Act. 8 (3) AMOUNT OF PENALTY.—Notwithstanding 9 the penalties set forth in section 5 of such Act, a 10 person who violates this Act shall be liable for a civil 11 penalty of not less than $2,500 per violation. 12 (4) REGULATIONS.—The Federal Trade Com- 13 mission shall prescribe, in accordance with section 14 553 of title 5, United States Code, such regulations 15 as are necessary to carry out the purposes of this 16 Act, including regulations as may be necessary or 17 appropriate to administer and carry out the pur- 18 poses and objectives of this Act, and to prevent eva- 19 sions thereof or to facilitate compliance therewith. 20 (b) ACTIONS BY CONSUMERS.— 21 (1) WILLFUL VIOLATIONS.—Any private pas- 22 senger automobile insurer who willfully violates this 23 Act with respect to any consumer is liable to that 24 consumer in an amount equal to the sum of— 25 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 1270 IH (A) any actual damages sustained by the 1 consumer as a result of the failure; 2 (B) such amount of punitive damages as 3 the court may allow; and 4 (C) in the case of any successful action to 5 enforce any liability under this paragraph, the 6 costs of the action together with reasonable at- 7 torneys’ fees as determined by the court. 8 (2) NEGLIGENT VIOLATIONS.—Any private pas- 9 senger automobile insurer who is negligent in failing 10 to comply with any requirement imposed under this 11 Act with respect to any consumer is liable to that 12 consumer in an amount equal to the sum of— 13 (A) any actual damages sustained by the 14 consumer as a result of the failure; and 15 (B) in the case of any successful action to 16 enforce any liability under this paragraph, the 17 costs of the action together with reasonable at- 18 torneys’ fees as determined by the court. 19 (3) ATTORNEYS’ FEES.—Upon a finding by the 20 court that an unsuccessful pleading, motion, or other 21 paper filed in connection with an action under this 22 subsection was filed in bad faith or for purposes of 23 harassment, the court shall award to the prevailing 24 party attorney’s fees reasonable in relation to the 25 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 1270 IH work expended in responding to the pleading, mo- 1 tion, or other paper. 2 (4) JURISDICTION OF COURTS; LIMITATION OF 3 ACTIONS.—An action to enforce any liability created 4 under this subsection may be brought in any appro- 5 priate United States district court, without regard to 6 the amount in controversy, or in any other court of 7 competent jurisdiction, not later than the earlier 8 of— 9 (A) 2 years after the date of discovery by 10 the plaintiff of the violation that is the basis for 11 such liability; or 12 (B) 5 years after the date on which the 13 violation that is the basis for such liability oc- 14 curs. 15 (c) ACTIONS BY STATES.— 16 (1) IN GENERAL.—In any case in which the at- 17 torney general of a State, or an official or agency of 18 a State, has reason to believe that an interest of the 19 residents of such State has been or is threatened or 20 adversely affected by an act or practice in violation 21 of this Act, the State, as parens patriae, may bring 22 a civil action on behalf of the residents of the State 23 in an appropriate State court or an appropriate dis- 24 trict court of the United States to— 25 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 1270 IH (A) enjoin such act or practice; 1 (B) enforce compliance with this Act; 2 (C) obtain damages, restitution, or other 3 compensation on behalf of residents of the 4 State; or 5 (D) obtain such other legal and equitable 6 relief as the court may consider to be appro- 7 priate. 8 (2) NOTICE.—Before filing an action under this 9 subsection, the attorney general, official, or agency 10 of the State involved shall provide to the Federal 11 Trade Commission a written notice of such action 12 and a copy of the complaint for such action. If the 13 attorney general, official, or agency determines that 14 it is not feasible to provide the notice described in 15 this paragraph before the filing of the action, the at- 16 torney general, official, or agency shall provide writ- 17 ten notice of the action and a copy of the complaint 18 to the Federal Trade Commission immediately upon 19 the filing of the action. 20 (3) AUTHORITY OF FEDERAL TRADE COMMIS- 21 SION.—On receiving notice under paragraph (2) of 22 an action under this subsection, the Federal Trade 23 Commission shall have the right— 24 (A) to intervene in the action; 25 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 1270 IH (B) upon so intervening, to be heard on all 1 matters arising therein; and 2 (C) to file petitions for appeal. 3 (4) RULE OF CONSTRUCTION.—For purposes of 4 bringing a civil action under this subsection, nothing 5 in this Act shall be construed to prevent an attorney 6 general, official, or agency of a State from exercising 7 the powers conferred on the attorney general, offi- 8 cial, or agency by the laws of such State to conduct 9 investigations, administer oaths and affirmations, or 10 compel the attendance of witnesses or the production 11 of documentary and other evidence. 12 SEC. 5. RELATION TO STATE LAW. 13 This Act does not annul, alter, affect, or exempt any 14 person subject to the provisions of this Act from complying 15 with the laws of any State with respect to the collection, 16 distribution, or use of any information on consumers, the 17 prevention or mitigation of identity theft, or the regulation 18 of the business of insurance, except to the extent that 19 those laws are inconsistent with any provision of this Act, 20 and then only to the extent of the inconsistency. 21 SEC. 6. DEFINITIONS. 22 For the purposes of this Act, the following definitions 23 apply: 24 VerDate Sep 11 2014 23:04 Mar 20, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H1270.IH H1270 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 1270 IH (1) AFFILIATE.—The term ‘‘affiliate’’ means an 1 entity that, dir [Text truncated for display. Full text available on Congress.gov.]