093_HB3661sam004 LRB093 09245 LRD 15367 a 1 AMENDMENT TO HOUSE BILL 3661 2 AMENDMENT NO. . Amend House Bill 3661 by replacing 3 everything after the enacting clause with the following: 4 "Section 1. Short title. This Act may be cited as the 5 Use of Credit Information in Personal Insurance Act. 6 Section 5. Purpose. The purpose of this Act is to 7 regulate the use of credit information for personal insurance 8 so that consumers are afforded certain protections with 9 respect to the use of that information. 10 Section 10. Scope. This Act applies to personal 11 insurance and not to commercial insurance. For purposes of 12 this Act, "personal insurance" means private passenger 13 automobile, homeowners, motorcycle, mobile-homeowners and 14 non-commercial dwelling fire insurance policies, and boat, 15 personal watercraft, snowmobile, and recreational vehicle 16 polices. Such policies must be individually underwritten for 17 personal, family, or household use. No other type of 18 insurance shall be included as personal insurance for the 19 purpose of this Act. 20 Section 15. Definitions. For the purposes of this Act, -2- LRB093 09245 LRD 15367 a 1 these defined words have the following meanings: 2 "Adverse Action" means a denial or cancellation of, an 3 increase in any charge for, or a reduction or other adverse 4 or unfavorable change in the terms of coverage or amount of, 5 any insurance, existing or applied for, in connection with 6 the underwriting of personal insurance. 7 "Affiliate" means any company that controls, is 8 controlled by, or is under common control with another 9 company. 10 "Applicant" means an individual who has applied to be 11 covered by a personal insurance policy with an insurer. 12 "Consumer" means an insured or an applicant for a 13 personal insurance policy whose credit information is used or 14 whose insurance score is calculated in the underwriting or 15 rating of a personal insurance policy. 16 "Consumer reporting agency" means any person that, for 17 monetary fees or dues or on a cooperative nonprofit basis, 18 regularly engages in whole or in part in the practice of 19 assembling or evaluating consumer credit information or other 20 information on consumers for the purpose of furnishing 21 consumer reports to third parties. 22 "Credit information" means any credit-related information 23 derived from a credit report, found on a credit report 24 itself, or provided on an application for personal insurance. 25 Information that is not credit-related shall not be 26 considered "credit information," regardless of whether it is 27 contained in a credit report or in an application or is used 28 to calculate an insurance score. 29 "Credit report" means any written, oral, or other 30 communication of information by a consumer reporting agency 31 bearing on a consumer's credit worthiness, credit standing, 32 or credit capacity, that is used or expected to be used or 33 collected in whole or in part for the purpose of serving as a 34 factor to determine personal insurance premiums, eligibility -3- LRB093 09245 LRD 15367 a 1 for coverage, or tier placement. 2 "Department" means the Department of Insurance. 3 "Insurance score" means a number or rating that is 4 derived from an algorithm, computer application, model, or 5 other process that is based in whole or in part on credit 6 information for the purposes of predicting the future 7 insurance loss exposure of an individual applicant or 8 insured. 9 Section 20. Use of credit information. An insurer 10 authorized to do business in this State that uses credit 11 information to underwrite or rate risks shall not: 12 (1) Use an insurance score that is calculated using 13 income, gender, address, ethnic group, religion, marital 14 status, or nationality of the consumer as a factor. 15 (2) Deny, cancel, or nonrenew a policy of personal 16 insurance solely on the basis of credit information, 17 without consideration of any other applicable 18 underwriting factor independent of credit information and 19 not expressly prohibited by item (1). An insurer shall 20 not be considered to have denied, cancelled, or 21 nonrenewed a policy if coverage is available through an 22 affiliate. 23 (3) Base an insured's renewal rates for personal 24 insurance solely upon credit information, without 25 consideration of any other applicable factor independent 26 of credit information. An insurer shall not be 27 considered to have based rates solely on credit 28 information if coverage is available in a different tier 29 of the same insurer. 30 (4) Take an adverse action against a consumer 31 solely because he or she does not have a credit card 32 account, without consideration of any other applicable 33 factor independent of credit information. -4- LRB093 09245 LRD 15367 a 1 (5) Consider an absence of credit information or an 2 inability to calculate an insurance score in underwriting 3 or rating personal insurance, unless the insurer does one 4 of the following: 5 (A) Treats the consumer in the manner filed 6 with the Department, if the insurer presents 7 information that such an absence or inability 8 relates to the risk for the insurer and submits a 9 filing certification form signed by an officer for 10 the insurer certifying that such treatment is 11 actuarially justified. 12 (B) Treats the consumer as if the applicant or 13 insured had neutral credit information, as defined 14 by the insurer. 15 (C) Excludes the use of credit information as 16 a factor and uses only other underwriting criteria. 17 (6) Take an adverse action against a consumer based 18 on credit information, unless an insurer obtains and uses 19 a credit report issued or an insurance score calculated 20 within 90 days from the date the policy is first written 21 or renewal is issued. 22 (7) Use credit information unless not later than 23 every 36 months following the last time that the insurer 24 obtained current credit information for the insured, the 25 insurer recalculates the insurance score or obtains an 26 updated credit report. Regardless of the other 27 requirements of this Section: 28 (A) At annual renewal, upon the request of a 29 consumer or the consumer's agent, the insurer shall 30 re-underwrite and re-rate the policy based upon a 31 current credit report or insurance score. An insurer 32 need not recalculate the insurance score or obtain 33 the updated credit report of a consumer more 34 frequently than once in a 12-month period. -5- LRB093 09245 LRD 15367 a 1 (B) The insurer shall have the discretion to 2 obtain current credit information upon any renewal 3 before the expiration of 36 months, if consistent 4 with its underwriting guidelines. 5 (C) An insurer is not required to obtain 6 current credit information for an insured, despite 7 the requirements of subitem (A) of item (7) of this 8 Section if one of the following applies: 9 (a) The insurer is treating the consumer 10 as otherwise filed with the Department. 11 (b) The insured is in the most 12 favorably-priced tier of the insurer, within a 13 group of affiliated insurers. However, the 14 insurer shall have the discretion to order 15 credit information, if consistent with its 16 underwriting guidelines. 17 (c) Credit was not used for underwriting 18 or rating the insured when the policy was 19 initially written. However, the insurer shall 20 have the discretion to use credit for 21 underwriting or rating the insured upon 22 renewal, if consistent with its underwriting 23 guidelines. 24 (d) The insurer re-evaluates the insured 25 beginning no later than 36 months after 26 inception and thereafter based upon other 27 underwriting or rating factors, excluding 28 credit information. 29 (8) Use the following as a negative factor in any 30 insurance scoring methodology or in reviewing credit 31 information for the purpose of underwriting or rating a 32 policy of personal insurance: 33 (A) Credit inquiries not initiated by the 34 consumer or inquiries requested by the consumer for -6- LRB093 09245 LRD 15367 a 1 his or her own credit information. 2 (B) Inquiries relating to insurance coverage, 3 if so identified on a consumer's credit report. 4 (C) Collection accounts with a medical 5 industry code, if so identified on the consumer's 6 credit report. 7 (D) Multiple lender inquiries, if coded by the 8 consumer reporting agency on the consumer's credit 9 report as being from the home mortgage industry and 10 made within 30 days of one another, unless only one 11 inquiry is considered. 12 (E) Multiple lender inquiries, if coded by the 13 consumer reporting agency on the consumer's credit 14 report as being from the automobile lending industry 15 and made within 30 days of one another, unless only 16 one inquiry is considered. 17 Section 25. Dispute resolution and error correction. If 18 it is determined through the dispute resolution process set 19 forth in the federal Fair Credit Reporting Act, 15 U.S.C. 20 1681i (a)(5), that the credit information of a current 21 insured was incorrect or incomplete and if the insurer 22 receives notice of that determination from either the 23 consumer reporting agency or from the insured, the insurer 24 shall re-underwrite and re-rate the consumer within 30 days 25 after receiving the notice. After re-underwriting or 26 re-rating the insured, the insurer shall make any adjustments 27 necessary, consistent with its underwriting and rating 28 guidelines. If an insurer determines that the insured has 29 overpaid premium, the insurer shall refund to the insured the 30 amount of overpayment calculated back to the shorter of 31 either the last 12 months of coverage or the actual policy 32 period. -7- LRB093 09245 LRD 15367 a 1 Section 30. Initial notification. 2 (a) If an insurer writing personal insurance uses credit 3 information in underwriting or rating a consumer, the insurer 4 or its agent shall disclose, either on the insurance 5 application or at the time the insurance application is 6 taken, that it may obtain credit information in connection 7 with the application. The disclosure shall be either written 8 or provided to an applicant in the same medium as the 9 application for insurance. The insurer need not provide the 10 disclosure statement required under this Section to any 11 insured on a renewal policy, if the consumer has previously 12 been provided a disclosure statement. 13 (b) Use of the following example disclosure statement 14 constitutes compliance with this Section: "In connection with 15 this application for insurance, we may review your credit 16 report or obtain or use a credit-based insurance score based 17 on the information contained in that credit report. We may 18 use a third party in connection with the development of your 19 insurance score.". 20 Section 35. Adverse action notification. If an insurer 21 takes an adverse action based upon credit information, the 22 insurer must meet all of the notice requirements of this 23 Section. The insurer shall: 24 (1) Provide notification to the consumer that an 25 adverse action has been taken, in accordance with the 26 requirements of the federal Fair Credit Reporting Act, 15 27 U.S.C. 1681m(a). 28 (2) Provide notification to the consumer explaining 29 the reason for the adverse action. The reasons must be 30 provided in sufficiently clear and specific language so 31 that a person can identify the basis for the insurer's 32 decision to take an adverse action. The notification 33 shall include a description of up to 4 factors that were -8- LRB093 09245 LRD 15367 a 1 the primary influences of the adverse action. The use of 2 generalized terms such as "poor credit history", "poor 3 credit rating", or "poor insurance score" does not meet 4 the explanation requirements of this Section. 5 Standardized credit explanations provided by consumer 6 reporting agencies or other third party vendors are 7 deemed to comply with this Section. 8 Section 40. Filing. 9 (a) Insurers that use insurance scores to underwrite and 10 rate risks must file their scoring models (or other scoring 11 processes) with the Department. A third party may file 12 scoring models on behalf of insurers. A filing that includes 13 insurance scoring may include loss experience justifying the 14 use of credit information. 15 (b) Any filing relating to credit information is 16 considered to be a trade secret under the Illinois Trade 17 Secrets Act. 18 Section 45. Enforcement; rates not regulated. 19 (a) The Department shall enforce the provisions of this 20 Act pursuant to the enforcement powers granted to it under 21 the Illinois Insurance Code. The Department may promulgate 22 rules necessary to enforce and administer this Act. 23 (b) Nothing contained in this Act shall be construed to 24 empower the Department to regulate or set the rates of any 25 insurer pursuant to this Act. 26 Section 50. Sale of policy term information by consumer 27 reporting agency. 28 (a) No consumer reporting agency shall provide or sell 29 data or lists that include any information that in whole or 30 in part was submitted in conjunction with an insurance 31 inquiry about a consumer's credit information or a request -9- LRB093 09245 LRD 15367 a 1 for a credit report or insurance score. Such information 2 includes, but is not limited to, the expiration dates of an 3 insurance policy or any other information that may identify 4 time periods during which a consumer's insurance may expire 5 and the terms and conditions of the consumer's insurance 6 coverage. 7 (b) The restrictions provided in subsection (a) of this 8 Section do not apply to data or lists the consumer reporting 9 agency supplies to the insurance agent or producer from whom 10 information was received, the insurer on whose behalf the 11 agent or producer acted, or the insurer's affiliates or 12 holding companies. 13 (c) Nothing in this Section shall be construed to 14 restrict any insurer from being able to obtain a claims 15 history report or a motor vehicle report. 16 Section 55. Severability. If any Section, paragraph, 17 sentence, clause, phrase, or part of this Act is declared 18 invalid due to an interpretation of or a future change in the 19 federal Fair Credit Reporting Act, the remaining Sections, 20 paragraphs, sentences, clauses, phrases, or parts thereof 21 shall be in no manner affected thereby but shall remain in 22 full force and effect. 23 (215 ILCS 5/155.38 rep) 24 Section 95. The Illinois Insurance Code is amended by 25 repealing Section 155.38. 26 Section 99. Effective date. This Act takes effect on 27 October 1, 2003.".