5.4 Fair Credit Reporting Act of 1970
You learned a little bit about the Fair Credit Reporting Act of 1970 in Lesson 1 while studying the history of regulation. Now it's time to elaborate for more detail.
As most everyone is aware, almost every type of financial transaction in our society relies on credit reports. It is a common belief that those who are responsible enough to take care of their credit are responsible enough to enter into additional financial agreements; and insurance is a financial agreement. It takes the insurer time and money to process an application and the insurer must make every effort possible to make sure the policies they write are covering those who are responsible enough to maintain the agreement at least long enough for the insurer to recoup its expenses during the process. A prematurely lapsed policy does no one any good.
Various consumer reporting agencies can supply the insurer with consumer investigative reports (inspection reports). Under the Fair Credit Reporting Act, the applicant must be informed that such a report may be made.
To obtain this report for the insurance company, the agency can conduct personal interviews with the applicant's neighbors, friends, family members, business associates, etc., to investigate such areas as:
- personal habits;
- lifestyle;
- reputation;
- health; and
- occupation.
Usually, these reports are not requested unless the applicant is requesting a large amount of insurance coverage.
If any adverse information is supplied that results in coverage being denied or approved with higher premium rates, the applicant must be notified within three days and given the name of the consumer reporting agency used. If the applicant requests a summary of the nature and scope of the investigation, the insurer must provide that information within five days.
HIPAA Disclosures
The Health Insurance Portability and Accountability Act (HIPAA) enforces specific requirements for health care providers with respect to the disclosure of patients' health and medical information. Health care providers are required to preserve patient confidentiality by protecting this information. If the information is inadvertently disclosed, the provider must mitigate harm to the patient.
Insurers and agents both have similar responsibilities in regards to health information. When an applicant is examined medically for underwriting purposes, all their medical information must remain confidential in order to protect the applicant's privacy. If the insurer needs to share this information (for example, with medical professionals), including any information related to potential HIV infection, the applicant MUST be given full notice of the insurer's practice in handling the medical information. The applicant has the right to maintain privacy and also must be given the right to refuse permission for the insurer to disseminate the information.
