Prohibit Auto Insurance Discrimination Act

II 116TH CONGRESS 2D SESSION S. 4755 To prohibit private passenger automobile insurers from using certain income proxies to determine insurance rates and eligibility. IN THE SENATE OF THE UNITED STATES SEPTEMBER 29, 2020 Mr. BOOKER introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 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’’. 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 (1) Private passenger automobile insurance 8 companies are institutions which help spread risk of 9 loss over a collective group of policyholders. 10 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 2 •S 4755 IS (2) Private passenger automobile insurance is 1 mandated in all States but New Hampshire. Legal 2 penalties for operating a vehicle without liability in- 3 surance in these States range from fines, to license 4 suspensions or revocations, to imprisonment. 5 (3) The private passenger automobile insurance 6 industry uses different variables to predict the over- 7 all costs and risks of drivers. The analysis and use 8 of these variables ultimately help the automobile in- 9 surer set premium rates charged to consumers which 10 the automobile insurer determines to be actuarially 11 supported. 12 (4) A pure loss ratio, a measurement of profit- 13 ability in insurance, is defined as losses divided by 14 premiums. Statistical correlations between certain 15 variables and pure loss ratios should be interpreted 16 to mean that the selected variable relates to profit- 17 ability, but not necessarily to the risk that an indi- 18 vidual will get into an automobile accident. 19 (5) A growing trend in the private passenger 20 automobile insurance industry is to use income prox- 21 ies for underwriting and rating. The use of income 22 proxies such as a driver’s education level, occupa- 23 tion, employment status, home ownership status, 24 credit score, consumer report, previous insurer, and 25 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 3 •S 4755 IS prior purchase of insurance by the industry as vari- 1 ables that significantly influence the insurance pre- 2 miums charged to drivers has become commonplace. 3 Use of these income proxies in this fashion results 4 in higher rates being charged to lower income driv- 5 ers while lower rates are being charged to the more 6 affluent driver. 7 (6) The American public is largely unaware 8 that a person’s education level, occupation, employ- 9 ment status, home ownership status, credit score, 10 consumer report, zip code, census tract, previous in- 11 surer, and prior purchase of insurance may be sig- 12 nificant factors used to determine eligibility for pre- 13 ferred auto insurance rates regardless of the per- 14 son’s driving history. As a result of the individual’s 15 ineligibility for preferred rates, the driver’s policy 16 and rate will be only offered from an affiliate com- 17 pany that has higher rates. 18 SEC. 3. REQUIREMENTS FOR PRIVATE PASSENGER AUTO- 19 MOBILE INSURERS. 20 (a) USE OF CERTAIN FACTORS AND INCOME PROX- 21 IES PROHIBITED.—It shall be unlawful for a private pas- 22 senger automobile insurer, or any of its affiliate insurers, 23 to take into consideration any of the factors described in 24 subsection (b) relating to a consumer in determining that 25 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 4 •S 4755 IS consumer’s eligibility for automobile insurance or in calcu- 1 lating the rate for that consumer. 2 (b) FACTORS.—The factors referred to in subsection 3 (a) are— 4 (1) gender; 5 (2) level of education; 6 (3) occupation; 7 (4) employment status; 8 (5) home ownership status; 9 (6) zip code or adjacent zip codes; 10 (7) census tract; 11 (8) marital status; 12 (9) credit score or credit-based insurance score; 13 (10) consumer report; 14 (11) previous insurer; or 15 (12) prior purchase of insurance of a consumer 16 from that automobile insurer. 17 (c) PUBLIC AVAILABILITY OF INFORMATION.—All 18 underwriting rules and rate filings for use by any private 19 passenger automobile insurer shall be available for public 20 inspection and may not be considered proprietary trade 21 secret information. 22 (d) REASONABLE PROCEDURES TO ASSURE COMPLI- 23 ANCE.—No person shall be held liable for any violation 24 of this Act if the person shows by a preponderance of the 25 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 5 •S 4755 IS evidence that at the time of the alleged violation the per- 1 son maintained reasonable procedures to assure compli- 2 ance with the provisions of this Act. 3 (e) RULES OF CONSTRUCTION.— 4 (1) FACTORS AND METHODS INFLUENCING 5 PREMIUMS.—For the purposes of this Act, a viola- 6 tion of subsection (a) shall be considered to have oc- 7 curred whenever the consideration of any of the fac- 8 tors described in subsection (b) prevents the con- 9 sumer from obtaining insurance at the lowest rate 10 available to the consumer from a private passenger 11 automobile insurer or any of its affiliates. Actions 12 considered a violation of such subsection include the 13 usage or consideration of any such factor resulting 14 in— 15 (A) the determination of a consumer’s eli- 16 gibility for automobile insurance or the calcula- 17 tion of the rate for that consumer; 18 (B) an action which prevents a consumer 19 from receiving certain rebates or discounts; 20 (C) an action which prevents a consumer 21 from obtaining insurance from an automobile 22 insurer or any of its affiliate companies; 23 (D) a denial, cancellation, non-renewal, or 24 change in policy or coverage terms; or 25 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 6 •S 4755 IS (E) any other impact on a consumer’s pre- 1 mium for insurance. 2 (2) AUTHORITY OF FEDERAL AND STATE AGEN- 3 CIES.—Nothing in this Act is intended to affect the 4 authority of any Federal or State agency to enforce 5 a prohibition against unfair or deceptive acts or 6 practices, including the making of false or mis- 7 leading statements in connection with a credit or in- 8 surance transaction that is not initiated by the con- 9 sumer. 10 SEC. 4. ENFORCEMENT. 11 (a) ENFORCEMENT BY FEDERAL TRADE COMMIS- 12 SION.— 13 (1) UNFAIR OR DECEPTIVE ACTS OR PRAC- 14 TICES.—A violation of this Act shall be treated as 15 a violation of a rule defining an unfair or deceptive 16 act or practice under section 18(a)(1)(B) of the Fed- 17 eral Trade Commission Act (15 U.S.C. 18 57a(a)(1)(B)). 19 (2) POWERS OF COMMISSION.—The Federal 20 Trade Commission shall enforce this Act in the same 21 manner, by the same means, and with the same ju- 22 risdiction, powers, and duties as though all applica- 23 ble terms and provisions of the Federal Trade Com- 24 mission Act (15 U.S.C. 41 et seq.) were incor- 25 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 7 •S 4755 IS porated into and made a part of this Act. Any per- 1 son who violates this Act shall be subject to the pen- 2 alties and entitled to the privileges and immunities 3 provided in the Federal Trade Commission Act. 4 (3) AMOUNT OF PENALTY.—Notwithstanding 5 the penalties set forth in section 18 of such Act, a 6 person who violates this Act shall be liable for a civil 7 penalty of not less than $2,500 per violation. 8 (4) REGULATIONS.—The Federal Trade Com- 9 mission shall prescribe, in accordance with section 10 553 of title 5, United States Code, such regulations 11 as are necessary to carry out the purposes of this 12 Act, including regulations as may be necessary or 13 appropriate to administer and carry out the pur- 14 poses and objectives of this Act, and to prevent eva- 15 sions thereof or to facilitate compliance therewith. 16 (b) ACTIONS BY CONSUMERS.— 17 (1) WILLFUL VIOLATIONS.—Any private pas- 18 senger automobile insurer who willfully violates this 19 Act with respect to any consumer is liable to that 20 consumer in an amount equal to the sum of— 21 (A) any actual damages sustained by the 22 consumer as a result of the failure; 23 (B) such amount of punitive damages as 24 the court may allow; and 25 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 8 •S 4755 IS (C) in the case of any successful action to 1 enforce any liability under this paragraph, the 2 costs of the action together with reasonable at- 3 torneys’ fees as determined by the court. 4 (2) NEGLIGENT VIOLATIONS.—Any private pas- 5 senger automobile insurer who is negligent in failing 6 to comply with any requirement imposed under this 7 Act with respect to any consumer is liable to that 8 consumer in an amount equal to the sum of— 9 (A) any actual damages sustained by the 10 consumer as a result of the failure; and 11 (B) in the case of any successful action to 12 enforce any liability under this paragraph, the 13 costs of the action together with reasonable at- 14 torneys’ fees as determined by the court. 15 (3) ATTORNEYS’ FEES.—Upon a finding by the 16 court that an unsuccessful pleading, motion, or other 17 paper filed in connection with an action under this 18 subsection was filed in bad faith or for purposes of 19 harassment, the court shall award to the prevailing 20 party attorney’s fees reasonable in relation to the 21 work expended in responding to the pleading, mo- 22 tion, or other paper. 23 (4) JURISDICTION OF COURTS; LIMITATION OF 24 ACTIONS.—An action to enforce any liability created 25 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 9 •S 4755 IS under this subsection may be brought in any appro- 1 priate United States district court, without regard to 2 the amount in controversy, or in any other court of 3 competent jurisdiction, not later than the earlier 4 of— 5 (A) 2 years after the date of discovery by 6 the plaintiff of the violation that is the basis for 7 such liability; or 8 (B) 5 years after the date on which the 9 violation that is the basis for such liability oc- 10 curs. 11 (c) ACTIONS BY STATES.— 12 (1) IN GENERAL.—In any case in which the at- 13 torney general of a State, or an official or agency of 14 a State, has reason to believe that an interest of the 15 residents of such State has been or is threatened or 16 adversely affected by an act or practice in violation 17 of this Act, the State, as parens patriae, may bring 18 a civil action on behalf of the residents of the State 19 in an appropriate State court or an appropriate dis- 20 trict court of the United States to— 21 (A) enjoin such act or practice; 22 (B) enforce compliance with this Act; 23 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 10 •S 4755 IS (C) obtain damages, restitution, or other 1 compensation on behalf of residents of the 2 State; or 3 (D) obtain such other legal and equitable 4 relief as the court may consider to be appro- 5 priate. 6 (2) NOTICE.—Before filing an action under this 7 subsection, the attorney general, official, or agency 8 of the State involved shall provide to the Federal 9 Trade Commission a written notice of such action 10 and a copy of the complaint for such action. If the 11 attorney general, official, or agency determines that 12 it is not feasible to provide the notice described in 13 this paragraph before the filing of the action, the at- 14 torney general, official, or agency shall provide writ- 15 ten notice of the action and a copy of the complaint 16 to the Federal Trade Commission immediately upon 17 the filing of the action. 18 (3) AUTHORITY OF FEDERAL TRADE COMMIS- 19 SION.—On receiving notice under paragraph (2) of 20 an action under this subsection, the Federal Trade 21 Commission shall have the right— 22 (A) to intervene in the action; 23 (B) upon so intervening, to be heard on all 24 matters arising therein; and 25 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 11 •S 4755 IS (C) to file petitions for appeal. 1 (4) RULE OF CONSTRUCTION.—For purposes of 2 bringing a civil action under this subsection, nothing 3 in this Act shall be construed to prevent an attorney 4 general, official, or agency of a State from exercising 5 the powers conferred on the attorney general, offi- 6 cial, or agency by the laws of such State to conduct 7 investigations, administer oaths and affirmations, or 8 compel the attendance of witnesses or the production 9 of documentary and other evidence. 10 SEC. 5. RELATION TO STATE LAW. 11 This Act does not annul, alter, affect, or exempt any 12 person subject to the provisions of this Act from complying 13 with the laws of any State with respect to the collection, 14 distribution, or use of any information on consumers, the 15 prevention or mitigation of identity theft, or the regulation 16 of the business of insurance, except to the extent that 17 those laws are inconsistent with any provision of this Act, 18 and then only to the extent of the inconsistency. 19 SEC. 6. DEFINITIONS. 20 For the purposes of this Act, the following definitions 21 apply: 22 (1) AFFILIATE.—The term ‘‘affiliate’’ means an 23 entity that, directly or indirectly, through one or 24 more intermediaries, controls, is controlled by, or is 25 VerDate Sep 11 2014 03:29 Oct 17, 2020 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S4755.IS S4755 kjohnson on DSK79L0C42PROD with BILLS 12 •S 4755 IS under common control with another entity. For pur- 1 poses of this paragraph, the term ‘‘control’’ means 2 the possession, directly or indirectly, of the power to 3 direct or cause the direction of the management and 4 policies of the entity, whether— 5 (A) through the ownership of voting securi- 6 ties; 7 [Text truncated for display. Full text available on Congress.gov.]