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.".