PAID Act

I 118TH CONGRESS 1ST SESSION H. R. 3880 To prohibit private passenger automobile insurers from using certain income proxies to determine insurance rates and eligibility. IN THE HOUSE OF REPRESENTATIVES JUNE 6, 2023 Mrs. WATSON COLEMAN (for herself, Ms. TLAIB, and Mr. TAKANO) intro- duced the following bill; which was referred to the Committee on Finan- cial Services, and in addition to the Committee on Energy and Com- merce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdic- tion 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 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 3880 IH (1) Private passenger automobile insurance 1 companies are institutions which help spread risk of 2 loss over a collective group of policyholders. 3 (2) Private passenger automobile insurance is 4 mandated in all States but New Hampshire. Legal 5 penalties for operating a vehicle without liability in- 6 surance in these States range from fines, to license 7 suspensions or revocations, to imprisonment. 8 (3) The private passenger automobile insurance 9 industry uses different variables to predict the over- 10 all costs and risks of drivers. The analysis and use 11 of these variables ultimately help the automobile in- 12 surer set premium rates charged to consumers which 13 the automobile insurer determines to be actuarially 14 supported. 15 (4) A pure loss ratio, a measurement of profit- 16 ability in insurance, is defined as losses divided by 17 premiums. Statistical correlations between certain 18 variables and pure loss ratios should be interpreted 19 to mean that the selected variable relates to profit- 20 ability, but not necessarily to the risk that an indi- 21 vidual will get into an automobile accident. 22 (5) A growing trend in the private passenger 23 automobile insurance industry is to use income prox- 24 ies for underwriting and rating. The use of income 25 VerDate Sep 11 2014 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 3880 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 14 insurer, 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 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 3880 IH senger automobile insurer, or any of its affiliate insurers, 1 to take into consideration any of the factors described in 2 subsection (b) relating to a consumer in determining that 3 consumer’s eligibility for automobile insurance or in calcu- 4 lating the rate for that consumer. 5 (b) FACTORS.—The factors referred to in subsection 6 (a) are— 7 (1) gender; 8 (2) level of education; 9 (3) occupation; 10 (4) employment status; 11 (5) home ownership status; 12 (6) ZIP Code or adjacent ZIP Codes; 13 (7) census tract; 14 (8) marital status; 15 (9) credit score or credit-based insurance score; 16 (10) consumer report; 17 (11) previous insurer; or 18 (12) prior purchase of insurance of a consumer 19 from that automobile insurer. 20 (c) SUBMISSIONS TO FTC REGARDING CERTAIN 21 BUSINESS PRACTICES.—Not later than 1 year after the 22 date of the enactment of this Act, and every 2 years there- 23 after, each private passenger automobile insurer, and each 24 of its affiliate insurers, shall submit to the Federal Trade 25 VerDate Sep 11 2014 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 3880 IH Commission such information as the Commission may re- 1 quire to demonstrate that the marketing, underwriting, 2 rating, claims handling, and fraud investigations of such 3 private passenger automobile insurer or affiliate insurer 4 (as the case may be), and any algorithm or model used 5 by such private passenger automobile insurer or affiliate 6 insurer (as the case may be) for such marketing, under- 7 writing, rating, claims handling, or fraud investigations, 8 do not disparately impact any group of customers based 9 on race, color, national or ethnic origin, religion, sex, sex- 10 ual orientation, disability, gender identity, or gender ex- 11 pression. 12 (d) PUBLIC AVAILABILITY OF INFORMATION.—All 13 underwriting rules and rate filings for use by any private 14 passenger automobile insurer shall be available for public 15 inspection and may not be considered proprietary trade 16 secret information. 17 (e) REASONABLE PROCEDURES TO ASSURE COMPLI- 18 ANCE.—No person shall be held liable for any violation 19 of this Act if the person shows by a preponderance of the 20 evidence that at the time of the alleged violation the per- 21 son maintained reasonable procedures to assure compli- 22 ance with the provisions of this Act. 23 (f) RULES OF CONSTRUCTION.— 24 VerDate Sep 11 2014 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •HR 3880 IH (1) FACTORS AND METHODS INFLUENCING 1 PREMIUMS.—For the purposes of this Act, a viola- 2 tion of subsection (a) shall be considered to have oc- 3 curred whenever the consideration of any of the fac- 4 tors described in subsection (b) prevents the con- 5 sumer from obtaining insurance at the lowest rate 6 available to the consumer from a private passenger 7 automobile insurer or any of its affiliates. Actions 8 considered a violation of such subsection include the 9 usage or consideration of any such factor resulting 10 in— 11 (A) the determination of a consumer’s eli- 12 gibility for automobile insurance or the calcula- 13 tion of the rate for that consumer; 14 (B) an action which prevents a consumer 15 from receiving certain rebates or discounts; 16 (C) an action which prevents a consumer 17 from obtaining insurance from an automobile 18 insurer or any of its affiliate companies; 19 (D) a denial, cancellation, non-renewal, or 20 change in policy or coverage terms; or 21 (E) any other impact on a consumer’s pre- 22 mium for insurance. 23 (2) AUTHORITY OF FEDERAL AND STATE AGEN- 24 CIES.—Nothing in this Act is intended to affect the 25 VerDate Sep 11 2014 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •HR 3880 IH authority of any Federal or State agency to enforce 1 a prohibition against unfair or deceptive acts or 2 practices, including the making of false or mis- 3 leading statements in connection with a credit or in- 4 surance transaction that is not initiated by the con- 5 sumer. 6 SEC. 4. ENFORCEMENT. 7 (a) ENFORCEMENT BY FEDERAL TRADE COMMIS- 8 SION.— 9 (1) UNFAIR OR DECEPTIVE ACTS OR PRAC- 10 TICES.—A violation of this Act shall be treated as 11 an unfair and deceptive act or practice proscribed 12 under section 5 of the Federal Trade Commission 13 Act (15 U.S.C. 45). 14 (2) POWERS OF COMMISSION.—The Federal 15 Trade Commission shall enforce this Act in the same 16 manner, by the same means, and with the same ju- 17 risdiction, powers, and duties as though all applica- 18 ble terms and provisions of the Federal Trade Com- 19 mission Act (15 U.S.C. 41 et seq.) were incor- 20 porated into and made a part of this Act. Any per- 21 son who violates this Act shall be subject to the pen- 22 alties and entitled to the privileges and immunities 23 provided in the Federal Trade Commission Act. 24 VerDate Sep 11 2014 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •HR 3880 IH (3) AMOUNT OF PENALTY.—Notwithstanding 1 the penalties set forth in section 5 of such Act, a 2 person who violates this Act shall be liable for a civil 3 penalty of not less than $2,500 per violation. 4 (4) REGULATIONS.—The Federal Trade Com- 5 mission shall prescribe, in accordance with section 6 553 of title 5, United States Code, such regulations 7 as are necessary to carry out the purposes of this 8 Act, including regulations as may be necessary or 9 appropriate to administer and carry out the pur- 10 poses and objectives of this Act, and to prevent eva- 11 sions thereof or to facilitate compliance therewith. 12 (b) ACTIONS BY CONSUMERS.— 13 (1) WILLFUL VIOLATIONS.—Any private pas- 14 senger automobile insurer who willfully violates this 15 Act with respect to any consumer is liable to that 16 consumer in an amount equal to the sum of— 17 (A) any actual damages sustained by the 18 consumer as a result of the failure; 19 (B) such amount of punitive damages as 20 the court may allow; and 21 (C) in the case of any successful action to 22 enforce any liability under this paragraph, the 23 costs of the action together with reasonable at- 24 torneys’ fees as determined by the court. 25 VerDate Sep 11 2014 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •HR 3880 IH (2) NEGLIGENT VIOLATIONS.—Any private pas- 1 senger automobile insurer who is negligent in failing 2 to comply with any requirement imposed under this 3 Act with respect to any consumer is liable to that 4 consumer in an amount equal to the sum of— 5 (A) any actual damages sustained by the 6 consumer as a result of the failure; and 7 (B) in the case of any successful action to 8 enforce any liability under this paragraph, the 9 costs of the action together with reasonable at- 10 torneys’ fees as determined by the court. 11 (3) ATTORNEYS’ FEES.—Upon a finding by the 12 court that an unsuccessful pleading, motion, or other 13 paper filed in connection with an action under this 14 subsection was filed in bad faith or for purposes of 15 harassment, the court shall award to the prevailing 16 party attorney’s fees reasonable in relation to the 17 work expended in responding to the pleading, mo- 18 tion, or other paper. 19 (4) JURISDICTION OF COURTS; LIMITATION OF 20 ACTIONS.—An action to enforce any liability created 21 under this subsection may be brought in any appro- 22 priate United States district court, without regard to 23 the amount in controversy, or in any other court of 24 VerDate Sep 11 2014 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •HR 3880 IH competent jurisdiction, not later than the earlier 1 of— 2 (A) 2 years after the date of discovery by 3 the plaintiff of the violation that is the basis for 4 such liability; or 5 (B) 5 years after the date on which the 6 violation that is the basis for such liability oc- 7 curs. 8 (c) ACTIONS BY STATES.— 9 (1) IN GENERAL.—In any case in which the at- 10 torney general of a State, or an official or agency of 11 a State, has reason to believe that an interest of the 12 residents of such State has been or is threatened or 13 adversely affected by an act or practice in violation 14 of this Act, the State, as parens patriae, may bring 15 a civil action on behalf of the residents of the State 16 in an appropriate State court or an appropriate dis- 17 trict court of the United States to— 18 (A) enjoin such act or practice; 19 (B) enforce compliance with this Act; 20 (C) obtain damages, restitution, or other 21 compensation on behalf of residents of the 22 State; or 23 VerDate Sep 11 2014 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 11 •HR 3880 IH (D) obtain such other legal and equitable 1 relief as the court may consider to be appro- 2 priate. 3 (2) NOTICE.—Before filing an action under this 4 subsection, the attorney general, official, or agency 5 of the State involved shall provide to the Federal 6 Trade Commission a written notice of such action 7 and a copy of the complaint for such action. If the 8 attorney general, official, or agency determines that 9 it is not feasible to provide the notice described in 10 this paragraph before the filing of the action, the at- 11 torney general, official, or agency shall provide writ- 12 ten notice of the action and a copy of the complaint 13 to the Federal Trade Commission immediately upon 14 the filing of the action. 15 (3) AUTHORITY OF FEDERAL TRADE COMMIS- 16 SION.—On receiving notice under paragraph (2) of 17 an action under this subsection, the Federal Trade 18 Commission shall have the right— 19 (A) to intervene in the action; 20 (B) upon so intervening, to be heard on all 21 matters arising therein; and 22 (C) to file petitions for appeal. 23 (4) RULE OF CONSTRUCTION.—For purposes of 24 bringing a civil action under this subsection, nothing 25 VerDate Sep 11 2014 03:52 Jul 04, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H3880.IH H3880 pbinns on DSKJLVW7X2PROD with $$_JOB 12 •HR 3880 IH in this Act shall be construed to prevent an attorney 1 general, official, or agency of a State from exercising 2 the powers conferred on the attorney general, offi- 3 cial, or agency by the laws of such State to conduct 4 investigations, administer oaths and affirmations, or 5 compel th [Text truncated for display. 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