The Federal Trade Commission's Bureau of Consumer Protection today released a staff opinion letter in accordance with which the nation's largest insurance reporting agency will, for the first time, provide millions of consumers applying for health, disability and life insurance with the same guarantees that protect consumers from unfair treatment in credit and employment investigations.
Under the new rule, approved by the FTC staff and agreed to by the reporting agency, the Medical Information Bureau (MIB), all insurance companies who are members of the MIB will abide by the Fair Credit Reporting Act requirement that an individual be informed when a consumer report played any part in the insurer's decision to deny coverage or to charge a higher rate. In such cases, the insurance company will notify the consumer of the name and address of the consumer reporting agency that provided the report. Consumers who receive the notice are entitled to receive a free copy of their report from the reporting agency, if requested within 30 days, to verify that all information is correct.
"In an area as important and personal as insurance, it is essential that consumers feel they are being treated fairly," Jodie Bernstein, Director of the Consumer Protection Bureau at the FTC said in announcing the agreement. "Consumers will now be told of the role that MIB reports have played in the denial or rating of insurance, and will be able to exercise the self-help remedies afforded by the Fair Credit Reporting Act."
The new policy becomes effective Oct. 2, 1995.
MIB, based outside of Boston, is an organization with approximately 750 member insurance companies. It collects and furnishes information on consumers to all MIB members for use in the insurance underwriting process. In addition to an individual's credit history, data collected by MIB may include medical conditions, driving records, criminal activity, and participation in hazardous sports, among other facts. MIB's member companies account for 99 percent of the individual life insurance policies and 80 percent of all health and disability policies issued in the United States and Canada.
Before the change in MIB rules, the rules stated that insurance companies did not need to abide by Fair Credit Reporting Act notification requirements if information from MIB's files was used only to alert members to the possible need for further investigation of an individual consumer.
Now, under the new MIB rule, MIB members will be required to give a notice to each applicant denied insurance, or charged more for insurance, whenever all of the following three conditions have occurred:
- the member received information from MIB pertaining to the applicant;
- the information received from MIB was used to alert that member to the possible need for further investigation of the applicant's insurability; and
- the application for insurance was rated or declined in whole or in part because of information obtained from that investigation.
According to Bernstein, MIB's adoption of the new rule also is significant because it resulted in an industry change without the government expense or additional time involved in bringing a law enforcement action. "FTC staff was able to achieve this important agreement cooperatively with industry. This is `reinventing government' at its best," Bernstein said.
In addition to the opinion letter to MIB, the FTC has prepared a "Facts for Business" brochure that will detail the FCRA requirements for insurance companies. The brochure will be provided to all MIB members and also will be available from the FTC by writing to: Federal Trade Commission Public Reference, Room 130, 6th Street and Pennsylvania Ave., NW, Washington, D.C. 20580. The FTC also publishes "Facts for Consumers: Fair Credit Reporting," and "Facts for Consumers: How to Dispute Credit Report Errors," which are available by mail or on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov