Public Act 93-0114
HB1640 Enrolled LRB093 02129 JLS 10958 b
AN ACT concerning the use of credit information and
insurance.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 1. Short title. This Act may be cited as the
Use of Credit Information in Personal Insurance Act.
Section 5. Purpose. The purpose of this Act is to
regulate the use of credit information for personal insurance
so that consumers are afforded certain protections with
respect to the use of that information.
Section 10. Scope. This Act applies to personal
insurance and not to commercial insurance. For purposes of
this Act, "personal insurance" means private passenger
automobile, homeowners, motorcycle, mobile-homeowners and
non-commercial dwelling fire insurance policies, and boat,
personal watercraft, snowmobile, and recreational vehicle
polices. Such policies must be individually underwritten for
personal, family, or household use. No other type of
insurance shall be included as personal insurance for the
purpose of this Act.
Section 15. Definitions. For the purposes of this Act,
these defined words have the following meanings:
"Adverse Action" means a denial or cancellation of, an
increase in any charge for, or a reduction or other adverse
or unfavorable change in the terms of coverage or amount of,
any insurance, existing or applied for, in connection with
the underwriting of personal insurance.
"Affiliate" means any company that controls, is
controlled by, or is under common control with another
company.
"Applicant" means an individual who has applied to be
covered by a personal insurance policy with an insurer.
"Consumer" means an insured or an applicant for a
personal insurance policy whose credit information is used or
whose insurance score is calculated in the underwriting or
rating of a personal insurance policy.
"Consumer reporting agency" means any person that, for
monetary fees or dues or on a cooperative nonprofit basis,
regularly engages in whole or in part in the practice of
assembling or evaluating consumer credit information or other
information on consumers for the purpose of furnishing
consumer reports to third parties.
"Credit information" means any credit-related information
derived from a credit report, found on a credit report
itself, or provided on an application for personal insurance.
Information that is not credit-related shall not be
considered "credit information," regardless of whether it is
contained in a credit report or in an application or is used
to calculate an insurance score.
"Credit report" means any written, oral, or other
communication of information by a consumer reporting agency
bearing on a consumer's credit worthiness, credit standing,
or credit capacity, that is used or expected to be used or
collected in whole or in part for the purpose of serving as a
factor to determine personal insurance premiums, eligibility
for coverage, or tier placement.
"Department" means the Department of Insurance.
"Insurance score" means a number or rating that is
derived from an algorithm, computer application, model, or
other process that is based in whole or in part on credit
information for the purposes of predicting the future
insurance loss exposure of an individual applicant or
insured.
Section 20. Use of credit information. An insurer
authorized to do business in this State that uses credit
information to underwrite or rate risks shall not:
(1) Use an insurance score that is calculated using
income, gender, address, ethnic group, religion, marital
status, or nationality of the consumer as a factor.
(2) Deny, cancel, or nonrenew a policy of personal
insurance solely on the basis of credit information,
without consideration of any other applicable
underwriting factor independent of credit information and
not expressly prohibited by item (1). An insurer shall
not be considered to have denied, cancelled, or
nonrenewed a policy if coverage is available through an
affiliate.
(3) Base an insured's renewal rates for personal
insurance solely upon credit information, without
consideration of any other applicable factor independent
of credit information. An insurer shall not be
considered to have based rates solely on credit
information if coverage is available in a different tier
of the same insurer.
(4) Take an adverse action against a consumer
solely because he or she does not have a credit card
account, without consideration of any other applicable
factor independent of credit information.
(5) Consider an absence of credit information or an
inability to calculate an insurance score in underwriting
or rating personal insurance, unless the insurer does one
of the following:
(A) Treats the consumer as otherwise approved
by the Department, if the insurer presents
information that such an absence or inability
relates to the risk for the insurer.
(B) Treats the consumer as if the applicant or
insured had neutral credit information, as defined
by the insurer.
(C) Excludes the use of credit information as
a factor and uses only other underwriting criteria.
(6) Take an adverse action against a consumer based
on credit information, unless an insurer obtains and uses
a credit report issued or an insurance score calculated
within 90 days from the date the policy is first written
or renewal is issued.
(7) Use credit information unless not later than
every 36 months following the last time that the insurer
obtained current credit information for the insured, the
insurer recalculates the insurance score or obtains an
updated credit report. Regardless of the other
requirements of this Section:
(A) At annual renewal, upon the request of a
consumer or the consumer's agent, the insurer shall
re-underwrite and re-rate the policy based upon a
current credit report or insurance score. An insurer
need not recalculate the insurance score or obtain
the updated credit report of a consumer more
frequently than once in a 12-month period.
(B) The insurer shall have the discretion to
obtain current credit information upon any renewal
before the expiration of 36 months, if consistent
with its underwriting guidelines.
(C) An insurer is not required to obtain
current credit information for an insured, despite
the requirements of subitem (A) of item (7) of this
Section if one of the following applies:
(a) The insurer is treating the consumer
as otherwise approved by the Department.
(b) The insured is in the most
favorably-priced tier of the insurer, within a
group of affiliated insurers. However, the
insurer shall have the discretion to order
credit information, if consistent with its
underwriting guidelines.
(c) Credit was not used for underwriting
or rating the insured when the policy was
initially written. However, the insurer shall
have the discretion to use credit for
underwriting or rating the insured upon
renewal, if consistent with its underwriting
guidelines.
(d) The insurer re-evaluates the insured
beginning no later than 36 months after
inception and thereafter based upon other
underwriting or rating factors, excluding
credit information.
(8) Use the following as a negative factor in any
insurance scoring methodology or in reviewing credit
information for the purpose of underwriting or rating a
policy of personal insurance:
(A) Credit inquiries not initiated by the
consumer or inquiries requested by the consumer for
his or her own credit information.
(B) Inquiries relating to insurance coverage,
if so identified on a consumer's credit report.
(C) Collection accounts with a medical
industry code, if so identified on the consumer's
credit report.
(D) Multiple lender inquiries, if coded by the
consumer reporting agency on the consumer's credit
report as being from the home mortgage industry and
made within 30 days of one another, unless only one
inquiry is considered.
(E) Multiple lender inquiries, if coded by the
consumer reporting agency on the consumer's credit
report as being from the automobile lending industry
and made within 30 days of one another, unless only
one inquiry is considered.
Section 25. Dispute resolution and error correction. If
it is determined through the dispute resolution process set
forth in the federal Fair Credit Reporting Act, 15 U.S.C.
1681i (a)(5), that the credit information of a current
insured was incorrect or incomplete and if the insurer
receives notice of that determination from either the
consumer reporting agency or from the insured, the insurer
shall re-underwrite and re-rate the consumer within 30 days
after receiving the notice. After re-underwriting or
re-rating the insured, the insurer shall make any adjustments
necessary, consistent with its underwriting and rating
guidelines. If an insurer determines that the insured has
overpaid premium, the insurer shall refund to the insured the
amount of overpayment calculated back to the shorter of
either the last 12 months of coverage or the actual policy
period.
Section 30. Initial notification.
(a) If an insurer writing personal insurance uses credit
information in underwriting or rating a consumer, the insurer
or its agent shall disclose, either on the insurance
application or at the time the insurance application is
taken, that it may obtain credit information in connection
with the application. The disclosure shall be either written
or provided to an applicant in the same medium as the
application for insurance. The insurer need not provide the
disclosure statement required under this Section to any
insured on a renewal policy, if the consumer has previously
been provided a disclosure statement.
(b) Use of the following example disclosure statement
constitutes compliance with this Section: "In connection with
this application for insurance, we may review your credit
report or obtain or use a credit-based insurance score based
on the information contained in that credit report. We may
use a third party in connection with the development of your
insurance score.".
Section 35. Adverse action notification. If an insurer
takes an adverse action based upon credit information, the
insurer must meet all of the notice requirements of this
Section. The insurer shall:
(1) Provide notification to the consumer that an
adverse action has been taken, in accordance with the
requirements of the federal Fair Credit Reporting Act, 15
U.S.C. 1681m(a).
(2) Provide notification to the consumer explaining
the reason for the adverse action. The reasons must be
provided in sufficiently clear and specific language so
that a person can identify the basis for the insurer's
decision to take an adverse action. The notification
shall include a description of up to 4 factors that were
the primary influences of the adverse action. The use of
generalized terms such as "poor credit history", "poor
credit rating", or "poor insurance score" does not meet
the explanation requirements of this Section.
Standardized credit explanations provided by consumer
reporting agencies or other third party vendors are
deemed to comply with this Section.
Section 40. Filing.
(a) Insurers that use insurance scores to underwrite and
rate risks must file their scoring models (or other scoring
processes) with the Department. A third party may file
scoring models on behalf of insurers. A filing that includes
insurance scoring may include loss experience justifying the
use of credit information.
(b) Any filing relating to credit information is
considered to be a trade secret under the Illinois Trade
Secrets Act.
Section 45. Enforcement; rates not regulated.
(a) The Department shall enforce the provisions of this
Act pursuant to the enforcement powers granted to it under
the Illinois Insurance Code. The Department may promulgate
rules necessary to enforce and administer this Act.
(b) Nothing contained in this Act shall be construed to
empower the Department to regulate or set the rates of any
insurer pursuant to this Act.
Section 50. Sale of policy term information by consumer
reporting agency.
(a) No consumer reporting agency shall provide or sell
data or lists that include any information that in whole or
in part was submitted in conjunction with an insurance
inquiry about a consumer's credit information or a request
for a credit report or insurance score. Such information
includes, but is not limited to, the expiration dates of an
insurance policy or any other information that may identify
time periods during which a consumer's insurance may expire
and the terms and conditions of the consumer's insurance
coverage.
(b) The restrictions provided in subsection (a) of this
Section do not apply to data or lists the consumer reporting
agency supplies to the insurance agent or producer from whom
information was received, the insurer on whose behalf the
agent or producer acted, or the insurer's affiliates or
holding companies.
(c) Nothing in this Section shall be construed to
restrict any insurer from being able to obtain a claims
history report or a motor vehicle report.
Section 55. Severability. If any Section, paragraph,
sentence, clause, phrase, or part of this Act is declared
invalid due to an interpretation of or a future change in the
federal Fair Credit Reporting Act, the remaining Sections,
paragraphs, sentences, clauses, phrases, or parts thereof
shall be in no manner affected thereby but shall remain in
full force and effect.
(215 ILCS 5/155.38 rep)
Section 95. The Illinois Insurance Code is amended by
repealing Section 155.38.
Section 99. Effective date. This Act takes effect on
October 1, 2003.