Nebraska Department of Insurance

DISCLOSURE REQUIREMENTS PURSUANT TO LB 444

The 2001 Legislature passed LB 444, which instituted two relatively simple disclosure requirements that apply to private passenger auto insurance. The applicable section of the law states:

"On and after July 1, 2002, no private passenger automobile liability policy shall be delivered, issued for delivery, or renewed with respect to any motor vehicle licensed in this state unless accompanied by a disclosure showing (1) the location used to determine the rate charged to the named insured and (2) if any credit-based rating was used to determine the rate charged." (The numbering shown in this quotation is not in the law. We added it to refer to the explanations that follow.)

1. For many insurers, the first of these two requirements will not require any work at all, because their policy forms and renewal certificates unambiguously show the garaging location(s) used to rate the vehicle(s) covered by the policy. For the law's requirement to be fulfilled in this fashion, please note that the policy must be clear on this point. The fact that the policyholder's address is shown on the declarations page will not suffice unless the policy makes it clear that this is the address that is used for rating purposes (and the insurer makes reasonable provisions to disclose the address used for rating purposes when it is different than the address shown on the declarations page).

   An insurer may also choose to comply with this law by using a separate enclosure that accompanies the policy or billing, or by changing the format of its billing statement. Note that there will be no need to file these statements or changes with the Department of Insurance.

   While changes to policies or endorsements that are made to comply with this law must be filed, we must stress that these are the only filings that should be made to comply with this law. If an insurer is not changing a policy form or endorsement, then there will be no need for us to give any kind of approval.

2. As of this writing, the applicability of this law's credit-based rating disclosure will be very limited. It does not cover:
   1. When an insurer uses credit history or credit scoring to determine whether it will provide coverage for a potential policyholder, or

   2. When a group of insurers uses credit history or credit scoring to determine which of its member insurers will provide coverage, even though the member insurers may have different rate levels.

This disclosure requirement covers only those situations where an individual insurer has two or more rate levels available to a policyholder and credit scoring or some other use of credit history is a factor used in determining which rate applies. In these situations, the insurer must make a clear affirmative statement to the policyholder that it has used credit history or credit scoring as a factor in determining the rate being charged. Please note that it will not suffice to merely include a blanket statement that credit scoring might have affected the rate - the disclosure should be an affirmative statement made only when credit scoring or credit history is used by the individual insurer in its pricing calculations.

While LB 444 does not require the disclosure to indicate the effect that credit scoring had upon the individual policyholder, we expect that insurers that do not explain this will receive additional questions from their policyholders. Some may call the Department of Insurance instead. As such, we suggest that insurers will find their interests (and ours) to be served by making broader disclosures than the minimal disclosure required by this law.

Please note that, if requested, insurers must provide this additional information to affected policyholders. Section 44-7517 requires that, "within a reasonable time after receiving a written request and after receiving payment of such reasonable charge as it may require, every insurer . shall furnish all pertinent information to any insured affected by a rate, premium, or prospective loss cost made by the insurer." Insurers should also note that the disclosure requirement contained in this law does not replace or supercede disclosure requirements that may exist elsewhere (e.g., in the Fair Credit Reporting Act).

Questions regarding these requirements may be addressed to