Investigative Consumer Report

Underwriting Aurelia application, an insurer orders a report that includes interviews with her neighbors and former colleagues about her general reputation, character and mode of living. Under the federal Fair Credit Reporting Act, how does this differ from an ordinary consumer report, and what does the insurer owe Aurelia?

1. A.It is an ordinary consumer report, so the insurer owes nothing unless it takes adverse actionThe personal interview element makes it investigative, which triggers advance disclosure duties independent of any adverse action.
2. B.It is a medical record, so the insurer must obtain a separate signed medical authorization before ordering itReputation and lifestyle interviews are not medical records. A different set of rules governs medical information.
3. C.It is prohibited entirely, because federal law bars insurers from interviewing third parties about an applicantInvestigative consumer reports are lawful. Federal law regulates disclosure rather than prohibiting the practice.
4. D.It is an investigative consumer report, so the insurer must disclose in writing that such a report may be obtained and, on request, describe the nature and scope of the investigationCorrect. Personal interviews about character and reputation make it an investigative consumer report with heightened disclosure duties.

Why: A report built from PERSONAL INTERVIEWS about a consumer character, general reputation, personal characteristics or mode of living is an INVESTIGATIVE CONSUMER REPORT, a heightened category under the Fair Credit Reporting Act. An ordinary consumer report is compiled from records such as credit and claims history without such interviews. Because an investigative report is more intrusive, the insurer must give the consumer written disclosure that such a report may be obtained, and on the consumer written request must disclose the nature and scope of the investigation. If the insurer then takes adverse action based on the report, it must also give an adverse action notice identifying the reporting agency so the consumer can obtain her file and dispute inaccuracies.

Declined for coverage, Bertram suspects the insurer's file contains an inaccurate note describing a hospitalization that never happened. Under the model insurance information and privacy act, he may:

1. A.Demand that the insurer reverse its underwriting decision, since a decision resting on inaccurate data is void.This converts a data right into an outcome right. The act governs access to and correction of information; it does not compel a particular underwriting result.
2. B.See the recorded information, request that it be corrected, and if refused, file a statement of dispute that must accompany the item in later disclosures.Access, a correction request, and a concise statement of dispute that travels with the disputed information are the three rights the model act gives the individual, and the insurer must furnish the statement to later recipients.
3. C.Obtain only a summary of the reasons for the decline, because underwriting files are confidential work product.This treats the entire file as privileged. The act gives access to recorded personal information about the individual, going considerably beyond a bare statement of reasons.
4. D.Require the insurer to delete the entire file, since he never consented to its creation.This asserts a deletion right the act does not grant. The remedy for disputed data is correction or a statement of dispute, not destruction of the underwriting record.

Why: The model act gives the individual a right of access to recorded personal information the insurer holds about him, along with a right to request correction, amendment, or deletion. If the insurer refuses, it must tell him why, and he may file a concise statement of what he believes the correct information to be. That statement must then travel with the disputed item to anyone the insurer later discloses it to, and to prior recipients on request.