H.R. 3664 — PAID Act

This section states six congressional findings on the private passenger automobile insurance industry, including (1) its role in spreading risk among policyholders, (2) its mandate in 49 states with penalties for noncompliance, (3) its use of variables to set actuarially supported premiums, (4) the meaning of pure loss ratios, (5) the growing use of income proxies (e.g., education level, occupation, credit score) that result in higher rates for lower-income drivers, and (6) public unawareness of these factors' impact on preferred rates and affiliate company pricing.

This section prohibits private passenger automobile insurers and their affiliates from using specified factors—including gender, level of education, occupation, employment status, home ownership status, ZIP Code or adjacent ZIP Codes, census tract, marital status, credit score or credit-based insurance score, consumer report, previous insurer, or prior purchase of insurance from that insurer—in determining consumer eligibility for or rates of automobile insurance. The section (1) requires such insurers to submit information to the Federal Trade Commission (FTC), beginning one year after enactment and every two years thereafter, demonstrating that their marketing, underwriting, rating, claims handling, fraud investigations, and related algorithms or models do not disparately impact customers based on race, color, national or ethnic origin, religion, sex, sexual orientation, disability, gender identity, or gender expression; (2) requires public availability of all underwriting rules and rate filings, which may not be considered proprietary trade secrets; (3) provides a safe harbor from liability for violations upon a showing by a preponderance of the evidence of reasonable compliance procedures; and (4) defines violations of the prohibition to include any use of the specified factors that prevents a consumer from obtaining the lowest available rate (e.g., through eligibility determinations, denial or non-renewal, or impacts on rebates, discounts, or premiums) while preserving federal and state agency authority over unfair or deceptive acts or practices.

This section provides for enforcement of the Act by (1) the Federal Trade Commission (FTC), treating violations as unfair or deceptive acts or practices under section 5 of the Federal Trade Commission Act (15 U.S.C. 45), with the same jurisdiction, powers, and duties as under that Act, a civil penalty of not less than $2,500 per violation, and authority to issue regulations; (2) consumers against private passenger automobile insurers for willful violations (actual damages, punitive damages, costs, and attorneys' fees) or negligent violations (actual damages, costs, and attorneys' fees), with actions subject to a statute of limitations of the earlier of 2 years after discovery or 5 years after occurrence; and (3) state attorneys general as parens patriae on behalf of residents for injunctions, compliance, damages, restitution, or other relief (after notice to the FTC, which may intervene).

This section preserves state laws on the collection, distribution, or use of consumer information, the prevention or mitigation of identity theft, or the regulation of the business of insurance, except to the extent of any inconsistency with this Act.

This section provides definitions for purposes of the Act, including "affiliate" (an entity that controls, is controlled by, or is under common control with another entity, with control defined by ownership of voting securities, contracts, reliance relationships, or common management and presumed at 10% or more voting interest); "automobile insurer" (an insurer transacting automobile, motor vehicle, or liability insurance); "census tract" (a small statistical subdivision of a county as defined by the Census Bureau); "consumer report" (as defined in section 603 of the Fair Credit Reporting Act (15 U.S.C. 1681a), excluding communications relating to a consumer's driving history or place of residence); "credit-based insurance score"; "credit score" (as defined in section 609(f)(2) of the Fair Credit Reporting Act (15 U.S.C. 1681g(f)(2))); "employment status"; "home ownership status"; "level of education" (excluding traffic safety courses or scholastic achievements); "occupation"; and "private passenger automobile" (a 4-wheel motor vehicle under 15,000 pounds gross vehicle weight not used for public conveyance, rental, or primarily in non-farming/ranching business).