Final answer:
The FCRA is the law that insurers and their producers must comply with when obtaining personal information from a third party concerning an applicant. It protects the personal financial information collected by credit reporting agencies and sets requirements for user consent and notification.
Step-by-step explanation:
When an insurance company requires personal information about an applicant from a third party, they need to comply with the Fair Credit Reporting Act (FCRA). This act was passed in 1970 and protects personal financial information collected by credit reporting agencies. Importantly, it regulates the collection, dissemination, and use of consumer credit information.
Under FCRA, insurers are required to notify applicants if they intend to obtain consumer reports and must obtain the individual's consent prior to doing so. If an adverse action is to be taken based on information contained in the report, such as denying the application, the insurer must provide the applicant with a notice that includes the contact information of the reporting agency and a statement of the applicant's right to dispute the accuracy of the information.