Can Insurance Deny Homeowner's Insurance Based on a Credit Score in New York State?

New York state insurers can use credit information for homeowner's insurance.

Insurance companies utilize the information in credit reports to determine eligibility and pricing of policies more frequently than many people realize. Though many states have laws that restrict the ways that insurers can gather and use credit reports, the practice remains quite common as of 2011. It is not illegal in New York for insurers to use credit report information, though the state does have laws that govern its use.

Notification

Current law in New York, as of 2011, states that insurers are only able to use credit information when they disclose this fact expressly to their customers. In other words, if the insurer plans to use your credit information to determine whether to sell you a homeowner's insurance policy, it must advise you of this beforehand. If you receive a denial letter supposedly based on credit information without first being notified that your information is being used, the insurer is in violation of state law.

Reporting

The New York Department of Insurance requires all insurers that operate in the state to file the underwriting information they receive with the department. The law further states that all consumer report information, including credit reports, must be relevant to the risk they are evaluating. Therefore, if the department determines that your credit score is not relevant to the purpose for which the insurer collected it, the insurer cannot use it to surcharge or deny your policy.

Renewals

New York state law does not permit insurers to terminate existing homeowner's insurance policies based on credit information. Therefore, if you have a policy already, your credit report cannot be used as a reason not to renew it. Similarly, the law prohibits insurers from raising premiums upon renewal simply because of a change in credit information. This is an important consumer protection, because insurers reevaluate credit information at least every three years, so you are protected if your score worsens during that time.

Trend in New York

In 2003, many bills were proposed to the state legislature regarding the use of credit scores for underwriting purposes. These bills included one that prevented credit scoring from having any impact on homeowner's insurance rates. As of 2011, insurers can base rates in part on credit scores, provided that they notify the customers of this fact and expressly explain if the rate could be lower with a better credit score. This demonstrates that, despite the contentiousness of the issue with many consumers, insurers and legislators alike see underwriting value in the use of credit scores.

References

• Insure: State Laws on Insurer Use of Credit Information
• New York Department of Insurance: The Fair Credit Reporting Act: How it Functions for Consumers and the Economy
• New York Department of Insurance: Consumer Shopping Guide for Homeowners and Tenants Insurance