Oregon Insurance Division Bulletin INS 2005-4
DATE: December 16, 2005
TO: All Insurers Providing Homeowner Insurance
RE: New Legislation–SB 118
The 2005 Oregon Legislature passed Senate Bill 118 (chapter 489, Oregon Laws 2005), which has an effective date of January 1, 2006. This legislation imposes new limits on the use of claim experience and inquiries in homeowner insurance underwriting and rating.
Insurers and other interested parties should also be aware of restrictions on the use of credit history and insurance scores, especially as those restrictions have been amended in SB 573 (chapter
464, Oregon Laws 2005). Issues arising from this legislation will be addressed in a bulletin that will also incorporate the matters relating to credit scoring that were addressed in Bulletin 2003-8.
SB 118 applies only to homeowner insurance, a package policy consisting of property and casualty insurance that covers risks of owning or occupying a dwelling and that is not intended to cover an owner's interest in rental property or commercial exposures.
Underwriting and Rating
The bill also provides that the limitations on the use of claims and inquiries do not prohibit an insurer from taking underwriting or rating action that is based on the known use or condition of
the property or on fraudulent acts of the consumer or that is otherwise allowed by law.
What is the difference between an inquiry and a claim?
As explained above, an insurer or insurance producer may not consider inquiries by a consumer in connection with issuance, renewal or rating of a policy. Specifically, section 4(3) of SB 118 prohibits an insurer or insurance producer from using an inquiry by a consumer "regarding the terms, conditions or coverage of an insurance policy, including an inquiry about an actual loss or claim filing process, to determine whether to issue or renew a policy or to determine rates or other terms and conditions of a policy if the consumer is not making a claim as part of the inquiry." It is important to understand the difference between a claim and an inquiry in this connection. A claim is a demand on the policy: the insured demands payment according to the terms of the contract or policy. An inquiry is a request for information; an inquiry could be hypothetical or it could relate to an actual loss to the insured. A simple question, such as "Is it covered under the policy?" is not a demand.
When dealing with a question, if an insurer or insurance producer is uncertain whether the consumer is making a claim as part of the inquiry, the insurer or producer should ask the consumer whether the consumer is making a claim. This will help ensure that the consumer's rights are properly considered and protected. If the consumer affirms that the inquiry is not a claim, the insurer or insurance producer may rely on that affirmation should the consumer later assert that a claim was made. Finally, insurers, insurance producers, consumers and other interested parties should be aware that the restrictions on the use of inquiries do not apply to an inquiry about a possible third party claim.
Each property and casualty insurer writing homeowner insurance and using claim history as a rating or underwriting consideration must ensure that its underwriting eligibility guidelines and rating plans properly implement the requirements of SB 118. Filing requirements for rating plans and rating systems are governed by ORS 737.205 and ORS 737.310, and OAR 836-010-0021(2).
This bulletin is dated the 16th day of December 2005, at Salem, Oregon.