093_HB1640eng HB1640 Engrossed LRB093 02129 JLS 10958 b 1 AN ACT concerning the use of credit information and 2 insurance. 3 Be it enacted by the People of the State of Illinois, 4 represented in the General Assembly: 5 Section 1. Short title. This Act may be cited as the 6 Use of Credit Information in Personal Insurance Act. 7 Section 5. Purpose. The purpose of this Act is to 8 regulate the use of credit information for personal insurance 9 so that consumers are afforded certain protections with 10 respect to the use of that information. 11 Section 10. Scope. This Act applies to personal 12 insurance and not to commercial insurance. For purposes of 13 this Act, "personal insurance" means private passenger 14 automobile, homeowners, motorcycle, mobile-homeowners and 15 non-commercial dwelling fire insurance policies, and boat, 16 personal watercraft, snowmobile, and recreational vehicle 17 polices. Such policies must be individually underwritten for 18 personal, family, or household use. No other type of 19 insurance shall be included as personal insurance for the 20 purpose of this Act. 21 Section 15. Definitions. For the purposes of this Act, 22 these defined words have the following meanings: 23 "Adverse Action" means a denial or cancellation of, an 24 increase in any charge for, or a reduction or other adverse 25 or unfavorable change in the terms of coverage or amount of, 26 any insurance, existing or applied for, in connection with 27 the underwriting of personal insurance. 28 "Affiliate" means any company that controls, is 29 controlled by, or is under common control with another HB1640 Engrossed -2- LRB093 02129 JLS 10958 b 1 company. 2 "Applicant" means an individual who has applied to be 3 covered by a personal insurance policy with an insurer. 4 "Consumer" means an insured or an applicant for a 5 personal insurance policy whose credit information is used or 6 whose insurance score is calculated in the underwriting or 7 rating of a personal insurance policy. 8 "Consumer reporting agency" means any person that, for 9 monetary fees or dues or on a cooperative nonprofit basis, 10 regularly engages in whole or in part in the practice of 11 assembling or evaluating consumer credit information or other 12 information on consumers for the purpose of furnishing 13 consumer reports to third parties. 14 "Credit information" means any credit-related information 15 derived from a credit report, found on a credit report 16 itself, or provided on an application for personal insurance. 17 Information that is not credit-related shall not be 18 considered "credit information," regardless of whether it is 19 contained in a credit report or in an application or is used 20 to calculate an insurance score. 21 "Credit report" means any written, oral, or other 22 communication of information by a consumer reporting agency 23 bearing on a consumer's credit worthiness, credit standing, 24 or credit capacity, that is used or expected to be used or 25 collected in whole or in part for the purpose of serving as a 26 factor to determine personal insurance premiums, eligibility 27 for coverage, or tier placement. 28 "Department" means the Department of Insurance. 29 "Insurance score" means a number or rating that is 30 derived from an algorithm, computer application, model, or 31 other process that is based in whole or in part on credit 32 information for the purposes of predicting the future 33 insurance loss exposure of an individual applicant or 34 insured. HB1640 Engrossed -3- LRB093 02129 JLS 10958 b 1 Section 20. Use of credit information. An insurer 2 authorized to do business in this State that uses credit 3 information to underwrite or rate risks shall not: 4 (1) Use an insurance score that is calculated using 5 income, gender, address, ethnic group, religion, marital 6 status, or nationality of the consumer as a factor. 7 (2) Deny, cancel, or nonrenew a policy of personal 8 insurance solely on the basis of credit information, 9 without consideration of any other applicable 10 underwriting factor independent of credit information and 11 not expressly prohibited by item (1). An insurer shall 12 not be considered to have denied, cancelled, or 13 nonrenewed a policy if coverage is available through an 14 affiliate. 15 (3) Base an insured's renewal rates for personal 16 insurance solely upon credit information, without 17 consideration of any other applicable factor independent 18 of credit information. An insurer shall not be 19 considered to have based rates solely on credit 20 information if coverage is available in a different tier 21 of the same insurer. 22 (4) Take an adverse action against a consumer 23 solely because he or she does not have a credit card 24 account, without consideration of any other applicable 25 factor independent of credit information. 26 (5) Consider an absence of credit information or an 27 inability to calculate an insurance score in underwriting 28 or rating personal insurance, unless the insurer does one 29 of the following: 30 (A) Treats the consumer as otherwise approved 31 by the Department, if the insurer presents 32 information that such an absence or inability 33 relates to the risk for the insurer. 34 (B) Treats the consumer as if the applicant or HB1640 Engrossed -4- LRB093 02129 JLS 10958 b 1 insured had neutral credit information, as defined 2 by the insurer. 3 (C) Excludes the use of credit information as 4 a factor and uses only other underwriting criteria. 5 (6) Take an adverse action against a consumer based 6 on credit information, unless an insurer obtains and uses 7 a credit report issued or an insurance score calculated 8 within 90 days from the date the policy is first written 9 or renewal is issued. 10 (7) Use credit information unless not later than 11 every 36 months following the last time that the insurer 12 obtained current credit information for the insured, the 13 insurer recalculates the insurance score or obtains an 14 updated credit report. Regardless of the other 15 requirements of this Section: 16 (A) At annual renewal, upon the request of a 17 consumer or the consumer's agent, the insurer shall 18 re-underwrite and re-rate the policy based upon a 19 current credit report or insurance score. An insurer 20 need not recalculate the insurance score or obtain 21 the updated credit report of a consumer more 22 frequently than once in a 12-month period. 23 (B) The insurer shall have the discretion to 24 obtain current credit information upon any renewal 25 before the expiration of 36 months, if consistent 26 with its underwriting guidelines. 27 (C) An insurer is not required to obtain 28 current credit information for an insured, despite 29 the requirements of subitem (A) of item (7) of this 30 Section if one of the following applies: 31 (a) The insurer is treating the consumer 32 as otherwise approved by the Department. 33 (b) The insured is in the most 34 favorably-priced tier of the insurer, within a HB1640 Engrossed -5- LRB093 02129 JLS 10958 b 1 group of affiliated insurers. However, the 2 insurer shall have the discretion to order 3 credit information, if consistent with its 4 underwriting guidelines. 5 (c) Credit was not used for underwriting 6 or rating the insured when the policy was 7 initially written. However, the insurer shall 8 have the discretion to use credit for 9 underwriting or rating the insured upon 10 renewal, if consistent with its underwriting 11 guidelines. 12 (d) The insurer re-evaluates the insured 13 beginning no later than 36 months after 14 inception and thereafter based upon other 15 underwriting or rating factors, excluding 16 credit information. 17 (8) Use the following as a negative factor in any 18 insurance scoring methodology or in reviewing credit 19 information for the purpose of underwriting or rating a 20 policy of personal insurance: 21 (A) Credit inquiries not initiated by the 22 consumer or inquiries requested by the consumer for 23 his or her own credit information. 24 (B) Inquiries relating to insurance coverage, 25 if so identified on a consumer's credit report. 26 (C) Collection accounts with a medical 27 industry code, if so identified on the consumer's 28 credit report. 29 (D) Multiple lender inquiries, if coded by the 30 consumer reporting agency on the consumer's credit 31 report as being from the home mortgage industry and 32 made within 30 days of one another, unless only one 33 inquiry is considered. 34 (E) Multiple lender inquiries, if coded by the HB1640 Engrossed -6- LRB093 02129 JLS 10958 b 1 consumer reporting agency on the consumer's credit 2 report as being from the automobile lending industry 3 and made within 30 days of one another, unless only 4 one inquiry is considered. 5 Section 25. Dispute resolution and error correction. If 6 it is determined through the dispute resolution process set 7 forth in the federal Fair Credit Reporting Act, 15 U.S.C. 8 1681i (a)(5), that the credit information of a current 9 insured was incorrect or incomplete and if the insurer 10 receives notice of that determination from either the 11 consumer reporting agency or from the insured, the insurer 12 shall re-underwrite and re-rate the consumer within 30 days 13 after receiving the notice. After re-underwriting or 14 re-rating the insured, the insurer shall make any adjustments 15 necessary, consistent with its underwriting and rating 16 guidelines. If an insurer determines that the insured has 17 overpaid premium, the insurer shall refund to the insured the 18 amount of overpayment calculated back to the shorter of 19 either the last 12 months of coverage or the actual policy 20 period. 21 Section 30. Initial notification. 22 (a) If an insurer writing personal insurance uses credit 23 information in underwriting or rating a consumer, the insurer 24 or its agent shall disclose, either on the insurance 25 application or at the time the insurance application is 26 taken, that it may obtain credit information in connection 27 with the application. The disclosure shall be either written 28 or provided to an applicant in the same medium as the 29 application for insurance. The insurer need not provide the 30 disclosure statement required under this Section to any 31 insured on a renewal policy, if the consumer has previously 32 been provided a disclosure statement. HB1640 Engrossed -7- LRB093 02129 JLS 10958 b 1 (b) Use of the following example disclosure statement 2 constitutes compliance with this Section: "In connection with 3 this application for insurance, we may review your credit 4 report or obtain or use a credit-based insurance score based 5 on the information contained in that credit report. We may 6 use a third party in connection with the development of your 7 insurance score.". 8 Section 35. Adverse action notification. If an insurer 9 takes an adverse action based upon credit information, the 10 insurer must meet all of the notice requirements of this 11 Section. The insurer shall: 12 (1) Provide notification to the consumer that an 13 adverse action has been taken, in accordance with the 14 requirements of the federal Fair Credit Reporting Act, 15 15 U.S.C. 1681m(a). 16 (2) Provide notification to the consumer explaining 17 the reason for the adverse action. The reasons must be 18 provided in sufficiently clear and specific language so 19 that a person can identify the basis for the insurer's 20 decision to take an adverse action. The notification 21 shall include a description of up to 4 factors that were 22 the primary influences of the adverse action. The use of 23 generalized terms such as "poor credit history", "poor 24 credit rating", or "poor insurance score" does not meet 25 the explanation requirements of this Section. 26 Standardized credit explanations provided by consumer 27 reporting agencies or other third party vendors are 28 deemed to comply with this Section. 29 Section 40. Filing. 30 (a) Insurers that use insurance scores to underwrite and 31 rate risks must file their scoring models (or other scoring 32 processes) with the Department. A third party may file HB1640 Engrossed -8- LRB093 02129 JLS 10958 b 1 scoring models on behalf of insurers. A filing that includes 2 insurance scoring may include loss experience justifying the 3 use of credit information. 4 (b) Any filing relating to credit information is 5 considered to be a trade secret under the Illinois Trade 6 Secrets Act. 7 Section 45. Enforcement; rates not regulated. 8 (a) The Department shall enforce the provisions of this 9 Act pursuant to the enforcement powers granted to it under 10 the Illinois Insurance Code. The Department may promulgate 11 rules necessary to enforce and administer this Act. 12 (b) Nothing contained in this Act shall be construed to 13 empower the Department to regulate or set the rates of any 14 insurer pursuant to this Act. 15 Section 50. Sale of policy term information by consumer 16 reporting agency. 17 (a) No consumer reporting agency shall provide or sell 18 data or lists that include any information that in whole or 19 in part was submitted in conjunction with an insurance 20 inquiry about a consumer's credit information or a request 21 for a credit report or insurance score. Such information 22 includes, but is not limited to, the expiration dates of an 23 insurance policy or any other information that may identify 24 time periods during which a consumer's insurance may expire 25 and the terms and conditions of the consumer's insurance 26 coverage. 27 (b) The restrictions provided in subsection (a) of this 28 Section do not apply to data or lists the consumer reporting 29 agency supplies to the insurance agent or producer from whom 30 information was received, the insurer on whose behalf the 31 agent or producer acted, or the insurer's affiliates or 32 holding companies. HB1640 Engrossed -9- LRB093 02129 JLS 10958 b 1 (c) Nothing in this Section shall be construed to 2 restrict any insurer from being able to obtain a claims 3 history report or a motor vehicle report. 4 Section 55. Severability. If any Section, paragraph, 5 sentence, clause, phrase, or part of this Act is declared 6 invalid due to an interpretation of or a future change in the 7 federal Fair Credit Reporting Act, the remaining Sections, 8 paragraphs, sentences, clauses, phrases, or parts thereof 9 shall be in no manner affected thereby but shall remain in 10 full force and effect. 11 (215 ILCS 5/155.38 rep) 12 Section 95. The Illinois Insurance Code is amended by 13 repealing Section 155.38. 14 Section 99. Effective date. This Act takes effect on 15 October 1, 2003.