What is an insurer required to do before denying coverage based on a consumer report?

An insurer is required to disclose the reporting agency information before denying coverage based on a consumer report. This obligation stems from the Fair Credit Reporting Act (FCRA), which mandates that if an insurer takes adverse action, such as denying coverage, based on information contained in a consumer report, they must inform the consumer about the specific source of that information. This allows consumers to understand where the negative information originated and gives them the opportunity to address any inaccuracies directly with the reporting agency.

Providing this information is crucial for maintaining transparency in the insurance process and ensuring consumers have access to their rights regarding the accuracy of their credit information. While notifying the policyholder and providing a written explanation might also be part of the insurer's process, the specific requirement concerning consumer reporting falls under the duty to disclose the reporting agency. Changing the policy terms is not a requirement related to the denial of coverage based on a consumer report, as the focus is on informing the consumer of the reasons for denial and the sources of that information.