Maine Insurance Superintendent Clarifies Handling of Credit-Based Adverse Action Notices

Sep 4, 2015


With the content of some insurers’ adverse action notices having been a source of significant consumer confusion in Maine, Superintendent of Insurance Eric A. Cioppa directed Bulletin 406, entitled “Insurance Scoring—Adverse Action Notices” to insurers that use credit information in underwriting or rating personal insurance policies.

Issued August 25, 2015, the Bulletin explains when insurers must send adverse action notices and Superintendent Cioppa’s expectations as to how insurers will handle consumer inquiries concerning adverse action notices.

The Maine Insurance Code requires that an insurer send its applicant or customer a notice when the company takes “adverse action based on credit information.”   Adverse action is “a denial or cancellation of, an increase in any charge for or a reduction or other adverse or unfavorable change in the terms of coverage or amount of any insurance, existing or applied for.”

It was noted that the Superintendent interprets this language the same way the United States Supreme Court has interpreted similar language in the Federal Fair Credit Reporting Act.

Notably, the content of some insurers’ adverse action notices has been a source of significant consumer confusion in Maine.  Subsection 2169-B(4)(B) of Maine Insurance Law requires that the notice must be “in sufficiently clear and specific language” that the consumer can identify why the insurer acted as it did.

Superintendent Cioppa explained his understanding that insurers often rely on credit reporting agencies and scoring model vendors to send them the factors and that this process is automated. This process results in some insurers including four factors regardless of their influence on that decision – negative, neutral or positive.  Insurers that do so can possibly violate Section 2169-B.

Further, a policy applicant or insured might have questions—whether addressed directly to the insurer or in a complaint filed with the Maine Bureau of Insurance—about why reported reasons negatively affected the insurer’s view of the prospective or covered risk.  Insurers are expected to explain to customers what happened in “sufficiently clear and specific” terms that the customer can understand, as well as explain the calculations that underlie their premiums.

To view the complete Bulletin 406, click here.


Should you have any questions or comments, please contact Colodny Fass.



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