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Public Act 093-0114


Public Act 93-0114 of the 93rd General Assembly

Public Act 93-0114

HB1640 Enrolled                      LRB093 02129 JLS 10958 b

    AN ACT concerning  the  use  of  credit  information  and

    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
    "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
    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
         (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
                   (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

    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
    (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.

Effective Date: 10/01/03