96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
SB2107

 

Introduced 2/20/2009, by Sen. Mattie Hunter

 

SYNOPSIS AS INTRODUCED:
 
See Index

    Amends the Use of Credit Information in Personal Insurance Act. In the provision concerning scope, includes non-commercial farm owners insurance policies and personal umbrella policies to the definition of "personal insurance". Makes changes in the provision concerning definitions. Makes changes in the provision concerning the use of credit information. Provides that an insurer authorized to do business in this State shall use credit information only for the purpose of initially underwriting a consumer. Provides that an insurer authorized to do business in this State that uses credit information to underwrite risks (instead of underwrite or rate risks) shall not take an adverse action against a consumer based on credit information unless and until certain requirements are met. Provides that an insurer must file language in its underwriting guidelines acknowledging the requirement to review and consider extraordinary life events. Provides that an insurer shall re-underwrite the consumer within 30 days if it is determined through any dispute resolution process (instead of the dispute resolution process set forth in the federal Fair Credit Reporting Act) that the credit information of a consumer was incorrect. Provides that scoring models filed by third parties are considered as filed by insurers and subject to the requirements of the Act. Provides that any insurer that used credit information or insurance scores for rating purposes prior to the effective date of the Act must file with the Director for approval an acceptable plan for removing use of credit information or insurance scores for rating purposes. Makes other changes. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1     AN ACT concerning insurance.
 
2     Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
 
4     Section 5. The Use of Credit Information in Personal
5 Insurance Act is amended by changing Sections 10, 15, 20, 22,
6 25, 30, 40, and 45 as follows:
 
7     (215 ILCS 157/10)
8     Sec. 10. Scope. This Act applies to personal insurance and
9 not to commercial insurance. For purposes of this Act,
10 "personal insurance" means private passenger automobile,
11 homeowners, motorcycle, mobile-homeowners and non-commercial
12 dwelling fire insurance policies, non-commercial farm owners
13 insurance policies, and boat, personal watercraft, snowmobile,
14 and recreational vehicle, and personal umbrella polices. Such
15 policies must be individually underwritten for personal,
16 family, or household use. No other type of insurance shall be
17 included as personal insurance for the purpose of this Act.
18 (Source: P.A. 93-114, eff. 10-1-03.)
 
19     (215 ILCS 157/15)
20     Sec. 15. Definitions. For the purposes of this Act, these
21 defined words have the following meanings:
22     "Adverse action" means a denial or cancellation within the

 

 

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1 first 60 days of initial coverage, of, an increase in any
2 charge for, or a reduction or other adverse or unfavorable
3 change in the terms of coverage or amount of, any insurance,
4 existing or applied for, in connection with the underwriting of
5 personal insurance.
6     "Affiliate" means any company that controls, is controlled
7 by, or is under common control with another company.
8     "Affiliated group of insurers" means any group of insurers
9 under common control that, whether by means of underwriting or
10 rating, are used to place an applicant in a specific company
11 within the affiliated group.
12     "Applicant" means an individual who has applied for the
13 first time to be covered by a personal insurance policy with an
14 insurer.
15     "Consumer" means an insured or an applicant for a personal
16 insurance policy whose credit information is used or whose
17 insurance score is calculated in the initial underwriting or
18 rating of a personal insurance policy.
19     "Consumer reporting agency" means any person that, for
20 monetary fees or dues or on a cooperative nonprofit basis,
21 regularly engages in whole or in part in the practice of
22 assembling or evaluating consumer credit information or other
23 information on consumers for the purpose of furnishing consumer
24 reports or credit or insurance scores to third parties.
25     "Credit information" means any credit-related information
26 derived from a credit report, found on a credit report itself,

 

 

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1 or provided on an application for personal insurance.
2 Information that is not credit-related shall not be considered
3 "credit information," regardless of whether it is contained in
4 a credit report or in an application or is used to calculate an
5 insurance score.
6     "Credit report" means any written, oral, or other
7 communication of information by a consumer reporting agency
8 bearing on a consumer's credit worthiness, credit standing, or
9 credit capacity, that is used or expected to be used or
10 collected in whole or in part for the purpose of serving as a
11 factor to determine personal insurance premiums, eligibility
12 for coverage of personal insurance , or tier placement.
13     "Director" means the Director of the Division of Insurance
14 within the Department of Financial and Professional
15 Regulation.
16     "Division Department" means the Division Department of
17 Insurance of the Department of Financial and Professional
18 Regulation.
19     "Domestic partner" means an individual in a domestic
20 partnership or civil union as recognized by a state or local
21 law or ordinance.
22     "Insurance score" means a number or rating that is derived
23 from an algorithm, computer application, model, or other
24 process that is based in whole or in part on credit information
25 for the purposes of predicting the future insurance loss
26 exposure of an individual applicant or insured.

 

 

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1     "Insurer" means any person, firm, corporation,
2 association, or aggregation of persons, including affiliated
3 groups of insurers, doing or proposing to do an insurance
4 business and subject to the insurance supervisory authority of,
5 or to liquidation, rehabilitation, reorganization, or
6 conservation by, the commissioner of insurance or equivalent
7 insurance supervisory official of a state.
8     "Underwriting" means only the act of accepting, rejecting,
9 or canceling within the first 60 days a policy of personal
10 insurance and shall not include any activities related to
11 determination of coverages, limits of insurance, or payment
12 plans available to a consumer; or to activities related to
13 rating a policy of personal insurance, including, but not
14 limited to, calculation of rates, placement of consumers into
15 tiers, or placement of consumers into a specific insurer within
16 an affiliated group of insurers based in whole or in part on
17 rates, coverages, or limits of insurance.
18 (Source: P.A. 93-114, eff. 10-1-03.)
 
19     (215 ILCS 157/20)
20     Sec. 20. Use of credit information. An insurer authorized
21 to do business in this State shall use credit information only
22 for the purpose of initially underwriting a consumer, as
23 defined and prescribed in this Act. An insurer authorized to do
24 business in this State that uses credit information to
25 underwrite or rate risks shall not:

 

 

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1         (1) Use credit information or an insurance score that
2     is based on or calculated using income, gender, address,
3     ethnic group, religion, marital status, or nationality of
4     the consumer as a factor.
5         (2) Deny or reject a policy of personal insurance or ,
6     cancel, or nonrenew a policy of personal insurance within
7     the first 60 days of initial coverage solely on the basis
8     of credit information, without consideration of any other
9     adverse risk-related applicable underwriting factor
10     independent of credit information and not expressly
11     prohibited by item (1). An insurer shall not be considered
12     to have denied or , cancelled, or nonrenewed a policy if
13     coverage is available through an affiliate. Making
14     coverage available through an affiliate shall not be used
15     as a proxy for charging a consumer different rates,
16     coverages, limits of insurance, or payment plans based on a
17     consumer's credit information.
18         (3) Base a consumer's an insured's renewal rates,
19     coverages, limits of insurance, or premium for personal
20     insurance solely upon credit information, including credit
21     information used in any insurance scoring model used for
22     rating without consideration of any other applicable
23     factor independent of credit information. An insurer shall
24     not be considered to have based rates solely on credit
25     information if coverage is available in a different tier of
26     the same insurer. Offering coverage through an affiliate or

 

 

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1     placing a consumer into a different tier shall not be used
2     as a proxy for charging a consumer different rates,
3     coverages, limits of insurance, or premium payment plans
4     because of a consumer's credit information.
5         (4) Take an adverse action against a consumer solely
6     because he or she does not have a credit card account,
7     without consideration of any other applicable factor
8     independent of credit information.
9         (5) Consider an absence of credit information or an
10     inability to calculate an insurance score in underwriting
11     or rating personal insurance. , unless the insurer does one
12     of the following:
13             (A) Treats the consumer as otherwise filed with the
14         Department, if the insurer presents information that
15         such an absence or inability relates to the risk for
16         the insurer and submits a filing certification form
17         signed by an officer for the insurer certifying that
18         such treatment is actuarially justified.
19             (B) Treats the consumer as if the applicant or
20         insured had neutral credit information, as defined by
21         the insurer.
22             (C) Excludes the use of credit information as a
23         factor and uses only other underwriting criteria.
24         (6) Take an adverse action against a consumer based on
25     credit information, unless and until an insurer obtains and
26     uses a credit report issued or an insurance score

 

 

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1     calculated within 90 days from the date the policy is first
2     written and completes all of the following requirements: or
3     renewal is issued.
4             (A) notifies the consumer, in writing, that the
5         insurer has obtained the consumer's credit
6         information;
7             (B) informs the consumer, in writing, what
8         information from the consumer's credit information
9         would trigger a potentially adverse action;
10             (C) offers the consumer an opportunity to respond
11         within 30 days after the potentially adverse credit
12         information; and
13             (D) considers the consumer's response prior to
14         taking an adverse action; if the insurer decides to
15         take an adverse action, the insurer must communicate
16         that fact and its rationale for doing so in writing.
17         (7) Use credit information unless not later than every
18     36 months following the last time that the insurer obtained
19     current credit information for the insured, the insurer
20     recalculates the insurance score or obtains an updated
21     credit report. Regardless of the other requirements of this
22     Section:
23             (A) At annual renewal, upon the request of a
24         consumer or the consumer's agent, the insurer shall
25         re-underwrite and re-rate the policy based upon a
26         current credit report or insurance score. An insurer

 

 

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1         need not recalculate the insurance score or obtain the
2         updated credit report of a consumer more frequently
3         than once in a 12-month period.
4             (B) The insurer shall have the discretion to obtain
5         current credit information upon any renewal before the
6         expiration of 36 months, if consistent with its
7         underwriting guidelines.
8             (C) An insurer is not required to obtain current
9         credit information for an insured, despite the
10         requirements of subitem (A) of item (7) of this Section
11         if one of the following applies:
12                 (a) The insurer is treating the consumer as
13             otherwise filed with the Department.
14                 (b) The insured is in the most
15             favorably-priced tier of the insurer, within a
16             group of affiliated insurers. However, the insurer
17             shall have the discretion to order credit
18             information, if consistent with its underwriting
19             guidelines.
20                 (c) Credit was not used for underwriting or
21             rating the insured when the policy was initially
22             written. However, the insurer shall have the
23             discretion to use credit for underwriting or
24             rating the insured upon renewal, if consistent
25             with its underwriting guidelines.
26                 (d) The insurer re-evaluates the insured

 

 

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1             beginning no later than 36 months after inception
2             and thereafter based upon other underwriting or
3             rating factors, excluding credit information.
4         (7) (8) Use the following as a negative factor in any
5     insurance scoring methodology or in reviewing credit
6     information for the purpose of underwriting or rating a
7     policy of personal insurance:
8             (A) Credit inquiries not initiated by the consumer
9         or inquiries requested by the consumer for his or her
10         own credit information.
11             (B) Inquiries relating to insurance coverage, if
12         so identified on a consumer's credit report or if
13         properly identified by the consumer as such.
14             (C) Collection accounts with a medical industry
15         code, if so identified on the consumer's credit report
16         or if properly identified by the consumer as such.
17             (D) Multiple lender inquiries, if coded by the
18         consumer reporting agency on the consumer's credit
19         report as being from the home mortgage industry and
20         made within 30 days of one another, unless only one
21         inquiry is considered, or if properly identified by the
22         consumer as such.
23             (E) Multiple lender inquiries, if coded by the
24         consumer reporting agency on the consumer's credit
25         report as being from the automobile lending industry
26         and made within 30 days of one another, unless only one

 

 

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1         inquiry is considered, or if properly identified by the
2         consumer as such.
3             (F) Home mortgage foreclosures.
4             (G) Lack of a home mortgage, if the reason for the
5         lack of a mortgage is that the consumer has paid off a
6         home mortgage in full.
7             (H) Lack of an automobile loan, if the reason for
8         the lack of an automobile loan is that the consumer has
9         paid off an automobile loan in full.
10             (I) Existence of a student loan used to pay
11         expenses associated with post-secondary education.
12             (J) Any credit information that the consumer is
13         disputing or has disputed or any credit information for
14         a dispute that is under review by the credit reporting
15         agency or creditor.
16             (K) Information related to the financing of a
17         primary residence if the consumer occupies the
18         premises and is not in default on the financing
19         agreement.
20         (8) Use credit information or an insurance score to
21     determine the coverage or coverages or policy or coverage
22     limits available to the consumer or to limit or restrict
23     the payment plans available to the consumer.
24         (9) Consider for underwriting purposes the credit
25     information of any of the following in addition to the
26     credit information of the named insured; if any of the

 

 

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1     following are listed as or considered to be named insureds
2     under the policy and the insurer considers the credit
3     information of all named insureds under the policy, then
4     the insurer shall consider only the credit information of
5     the named insured whose credit information results in the
6     most favorable underwriting treatment of the consumer:
7             (A) An individual who is not the named insured
8         under the policy.
9             (B) The spouse or other family member of the named
10         insured.
11             (C) A domestic partner who resides in the same
12         household of the named insured.
13         (10) Use different credit or insurance scoring methods
14     or models to underwrite the same named insured under
15     various personal lines insurance policies with the
16     insurer, unless the insurer underwrites the named insured
17     using only the most favorable credit or insurance scoring
18     results for all of the named insured's personal lines
19     policies.
20 (Source: P.A. 93-114, eff. 10-1-03; 93-477, eff. 10-1-03.)
 
21     (215 ILCS 157/22)
22     Sec. 22. Extraordinary life events.
23     (a) An insurer authorized to do business in this State that
24 uses credit information or an insurance score to underwrite or
25 rate risks shall review and consider an exception to its

 

 

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1 credit-related underwriting treatment of an applicant or
2 insured the risk score based upon extraordinary life events
3 after receiving a written and signed notification from the
4 applicant or insured explaining how the applicant or insured
5 believes the extraordinary life event adversely impacts the
6 applicant's or insured's credit information or insurance risk
7 score.
8     (b) For the purposes of this Section, "extraordinary life
9 event" includes, but is not limited to, means the following:
10         (1) a catastrophic illness or injury to an applicant or
11     insured or an immediate family member of an applicant or
12     insured;
13         (2) the death of a spouse, child, or parent of an
14     applicant or insured;
15         (3) involuntary loss of employment for a period of 3
16     months or more by an applicant or insured;
17         (4) identity theft of an applicant or insured; or
18         (5) dissolution of marriage of an applicant or insured;
19     or .
20         (6) military deployment of an applicant or insured.
21     (c) An insurer must file language in its underwriting
22 guidelines acknowledging the requirement to review and
23 consider extraordinary life events.
24 (Source: P.A. 94-245, eff. 7-1-06.)
 
25     (215 ILCS 157/25)

 

 

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1     Sec. 25. Dispute resolution and error correction. If it is
2 determined through any the dispute resolution process,
3 including, but not limited to, the process set forth in the
4 federal Fair Credit Reporting Act, 15 U.S.C. 1681i(a)(5), that
5 the credit information of a consumer current insured was
6 incorrect or incomplete and if the insurer receives notice of
7 that determination from either the consumer reporting agency or
8 from the consumer insured, the insurer shall re-underwrite and
9 re-rate the consumer within 30 days after receiving the notice.
10 After re-underwriting or re-rating the consumer insured, the
11 insurer shall make any adjustments necessary to ensure that the
12 incorrect or incomplete credit information no longer adversely
13 affects the consumer , consistent with its underwriting and
14 rating guidelines. If an insurer determines that the insured
15 has overpaid premium, the insurer shall refund to the insured
16 the amount of overpayment calculated back to the shorter of
17 either the last 12 months of coverage or the actual policy
18 period.
19 (Source: P.A. 93-114, eff. 10-1-03.)
 
20     (215 ILCS 157/30)
21     Sec. 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 taken,

 

 

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1 that it may obtain credit information in connection with the
2 application. The disclosure shall be either written or provided
3 to an applicant in the same medium as the application for
4 insurance. The insurer need not provide the disclosure
5 statement required under this Section to any insured on a
6 renewal policy, if the consumer has previously been provided a
7 disclosure statement.
8     (b) Use of the following example disclosure statement
9 constitutes compliance with this Section: "In connection with
10 this application for insurance, we may review your credit
11 report or obtain or use a credit-based insurance score based on
12 the information contained in that credit report. We may use a
13 third party in connection with the development of your
14 insurance score. Negative information obtained from your
15 credit report or credit information may cause you to be denied
16 or rejected for insurance coverage, or have your insurance
17 canceled within the first 60 days of coverage of a new policy.
18 Accordingly, you should be aware of the contents of your credit
19 report so that you can review it periodically. Federal law
20 gives you the right to dispute inaccurate or incomplete
21 information on your credit report.".
22 (Source: P.A. 93-114, eff. 10-1-03.)
 
23     (215 ILCS 157/40)
24     Sec. 40. Filing.
25     (a) Insurers that use credit information or insurance

 

 

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1 scores to underwrite consumers and rate risks must file their
2 credit-related underwriting guidelines and credit or insurance
3 scoring models (or other scoring processes) with the Division
4 Department. A third party may file scoring models on behalf of
5 insurers. However, for purposes of this Act, scoring models
6 filed by third parties are considered as filed by insurers and
7 subject to the same requirements under this Act. All
8 credit-related filings, including scoring models, must be
9 complete, concise, and easily comprehensible by both the
10 Division and consumers. Insurers may not file underwriting
11 guidelines or scoring models that contain unnecessarily
12 complex algorithms or an unreasonable number of pages in an
13 attempt to circumvent the requirement that such filings be
14 complete, concise, and easily comprehensible by both the
15 Division and consumers. A filing that includes insurance
16 scoring may include loss experience justifying the use of
17 credit information.
18     (b) Any insurer that used credit information or insurance
19 scores for rating purposes prior to the effective date of this
20 Act must immediately file with the Director for approval an
21 acceptable plan, methodology, or process, including, but not
22 limited to, revised underwriting guidelines, rates, and rating
23 rules, for removing use of credit information or insurance
24 scores for rating purposes. No plan, methodology, process,
25 underwriting guidelines, rates, or rating rules shall in any
26 way be calculated using or based on credit information or

 

 

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1 insurance scores, including, but not limited to, charging
2 consumers different rates based on their prior credit
3 information or insurance scores, placing consumers into tiers
4 or affiliated insurers based on prior credit information or
5 insurance scores, or providing discounts or surcharges based on
6 credit information or insurance scores.
7     (c) In any filing that includes use of credit information
8 or insurance scoring, an insurer may include loss experience
9 and actuarial information justifying the use of credit
10 information, or must make such information available to the
11 Division upon request.
12     (d) In order that consumers may understand the various ways
13 credit information and insurance scores affect insurance
14 acceptance, rejection, and underwriting, all underwriting
15 guideline and scoring model filings (b) Any filing relating to
16 credit information is deemed to be public information and not
17 is considered to be a trade secret under the Illinois Trade
18 Secrets Act.
19 (Source: P.A. 93-114, eff. 10-1-03.)
 
20     (215 ILCS 157/45)
21     Sec. 45. Enforcement; rates not regulated.
22     (a) The Division Department shall enforce the provisions of
23 this Act pursuant to the enforcement powers granted to it under
24 the Illinois Insurance Code (215 ILCS 5/1 et seq.). The
25 Division Department may promulgate rules necessary to enforce

 

 

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1 and administer this Act.
2     (b) Except for the powers granted under subsection (b) of
3 Section 40, nothing Nothing contained in this Act shall be
4 construed to empower the Division Department to regulate or set
5 the rates of any insurer pursuant to this Act.
6 (Source: P.A. 93-114, eff. 10-1-03.)
 
7     Section 99. Effective date. This Act takes effect upon
8 becoming law.

 

 

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1 INDEX
2 Statutes amended in order of appearance
3     215 ILCS 157/10
4     215 ILCS 157/15
5     215 ILCS 157/20
6     215 ILCS 157/22
7     215 ILCS 157/25
8     215 ILCS 157/30
9     215 ILCS 157/40
10     215 ILCS 157/45