December 9, 2003, Introduced by Senators CROPSEY, SWITALSKI and GARCIA and referred to the Committee on Banking and Financial Institutions.



























                                                                                 A bill to amend 1956 PA 218, entitled                                             


    "The insurance code of 1956,"                                               


    (MCL 500.100 to 500.8302) by adding chapter 21A.                            


                THE PEOPLE OF THE STATE OF MICHIGAN ENACT:                      


1            CHAPTER 21A CREDIT INFORMATION AND CREDIT SCORES                   


2       Sec. 2151.  As used in this chapter:                                        


3       (a) "Adverse action" means a denial or cancellation of, an                  


4   increase in any charge for, or a reduction or other adverse or              


5   unfavorable change in the terms of coverage or amount of, any               


6   insurance, existing or applied for, in connection with the                  


7   underwriting of personal insurance and as otherwise permitted               


8   under this act.                                                             


9       (b) "Consumer reporting agency" means any person which, for                 


10  monetary fees, dues, or on a cooperative nonprofit basis,                   


11  regularly engages in whole or in part in the practice of                    



1   assembling or evaluating consumer credit information or other               


2   information on consumers for the purpose of furnishing consumer             


3   reports to third parties.                                                   


4       (c) "Credit information" means any credit-related information               


5   derived from a credit report, found on a credit report itself, or           


6   provided on an application for personal insurance.  Information             


7   that is not credit-related shall not be considered credit                   


8   information, regardless of whether it is contained in a credit              


9   report or in an application, or is used to calculate an insurance           


10  score.                                                                      


11      (d) "Credit report" means any written, oral, or other                       


12  communication of information by a consumer reporting agency                 


13  bearing on a consumer's credit worthiness, credit standing, or              


14  credit capacity used or expected to be used or collected in whole           


15  or in part for the purpose of serving as a factor to determine,             


16  as otherwise permitted under this act, personal insurance                   


17  premiums, eligibility for coverage or for a premium discount                


18  plan, or tier placement.                                                    


19      (e) "Insurance score" means a number or rating that is                      


20  derived from an algorithm, computer application, model, or other            


21  process that is based in whole or in part on credit information             


22  for the purposes of predicting the future insurance loss exposure           


23  of an individual applicant or insured.                                      


24      Sec. 2153.  (1) This chapter applies to all                                 


25  property/casualty insurance policies written for personal,                  


26  family, or household use including automobile, home, motorcycle,            


27  mobile home, noncommercial dwelling fire, boat, personal                    


1   watercraft, snowmobile, and recreational vehicle, whether written           


2   on an individual, group, franchise, blanket policy, or similar              


3   basis.                                                                      


4       (2) An insurer shall not use credit information or a credit                 


5   score for premium surcharges.                                               


6       Sec. 2155.  An insurer shall not use credit information or a                


7   credit-based insurance score unless all of the following are                


8   met:                                                                        


9       (a) The insurer or its producer discloses, at the renewal of                


10  a policy, on an insurance application, or at the time the                   


11  application is taken, that it may obtain credit information.                


12  This disclosure shall be either written or provided to an                   


13  applicant in the same medium as the application for insurance or            


14  notice of renewal.  This disclosure is not required to be given             


15  to an insured on a renewal policy if the insured has previously             


16  been provided a disclosure statement.  An insurer may use the               


17  following disclosure statement:                                             


18      "In connection with this application for insurance, we may              


19      review your credit report or obtain or use a credit-based               


20      insurance score based on the information contained in that              


21      credit report.  We may use a third party in connection with             


22      the development of your insurance score.".                              


23      (b) The insurer or a third party on behalf of the insurer                   


24  files with the commissioner the scoring models or other scoring             


25  processes used.  A filing that includes insurance scoring may               


26  include loss experience justifying the use of credit                        


27  information.                                                                


1       (c) The insurer or a third party on behalf of the insurer                   


2   does not use income, gender, address, zip code, ethnic group,               


3   religion, marital status, or nationality of the insured or                  


4   applicant for insurance in calculating an insurance score.                  


5       (d) The insurer does not do any of the following:                           


6                                                                                (i) Deny, cancel, or nonrenew a policy solely or                                    


7   substantially on the basis of credit information, without                   


8   consideration of any other applicable underwriting factor                   


9   independent of credit information and not expressly prohibited by           


10  this act.                                                                   


11      (ii) Base an insured's premium discount or renewal rates                     


12  solely or substantially upon credit information, without                    


13  consideration of any other applicable factor independent of                 


14  credit information.                                                         


15      (iii) Take an adverse action against a consumer solely or                    


16  substantially because he or she does not have a credit card                 


17  account, without consideration of any other applicable factor               


18  independent of credit information.                                          


19      (e) The insurer or a third party on behalf of the insurer                   


20  does not consider an absence of credit information or an                    


21  inability to calculate an insurance score unless the insurer or             


22  third party on behalf of the insurer treats the consumer as                 


23  otherwise approved by the commissioner and the insurer presents             


24  information to the commissioner that such an absence or inability           


25  relates to the insurer's risk.                                              


26      (f) The insurer or a third party on the insurer's behalf uses               


27  a credit report issued or an insurance score calculated within 90           


1   days from the date the policy is first written or renewed.                  


2       (g) Not later than every 36 months following the last time                  


3   the insurer or a third party on the insurer's behalf obtained               


4   current credit information for the insured, the insurer or a                


5   third party on the insurer's behalf recalculates the insurance              


6   score or obtains an updated credit report subject to all of the             


7   following:                                                                  


8                                                                                (i) Upon request of an insured or the insured's producer at                         


9   annual renewal, an insurer or a third party on the insurer's                


10  behalf shall reexamine a current credit report or insurance                 


11  score.  An insurer or a third party on the insurer's behalf is              


12  not required to recalculate the insurance score or obtain an                


13  updated credit report more frequently than once in a 12-month               


14  period.                                                                     


15      (ii) An insurer or a third party on the insurer's behalf may                 


16  order a credit report upon any renewal before 36 months if the              


17  insurer does so consistently with all its insureds.                         


18      (iii) Notwithstanding subparagraph (i), an insurer or a third                 


19  party on the insurer's behalf is not required to obtain current             


20  credit information for an insured if 1 of the following applies:            


21      (A) The insurer is treating the consumer as otherwise                       


22  approved by the commissioner.                                               


23      (B) The insured is in the most favorably-priced tier of the                 


24  insurer.  However, the insurer shall have the discretion to order           


25  the report, if consistent with its underwriting guidelines.                 


26      (C) Credit was not used for underwriting or rating the                      


27  insured when the policy was initially written.  However, the                


1   insurer may use credit for underwriting, a premium discount plan,           


2   or rating the insured upon renewal, if consistent with its                  


3   underwriting guidelines and this act.                                       


4       (D) The insurer reevaluates the insured beginning no later                  


5   than 36 months after inception and thereafter based upon other              


6   underwriting, premium discount plan, or rating factors as                   


7   permitted under this act, excluding credit information.                     


8       (h) The insurer or a third party on the insurer's behalf does               


9   not use the following as a negative factor in any insurance score           


10  or in reviewing credit information:                                         


11                                                                               (i) Credit inquiries not initiated by the consumer or                               


12  requested by the consumer for his or her own credit information.            


13      (ii) Credit inquiries relating to insurance coverage, if so                  


14  identified on an insured's or applicant's credit report.                    


15      (iii) Collection accounts with a medical industry code, if so                


16  identified on the consumer's credit report.                                 


17      (iv) Multiple lender inquiries, if coded by the consumer                     


18  reporting agency on the credit report as being from the home                


19  mortgage industry and made within 45 days from one another,                 


20  unless only 1 inquiry is considered.                                        


21      (v) Multiple lender inquiries, if coded by the consumer                     


22  reporting agency on the credit report as being from the                     


23  automobile lending industry and made within 45 days of one                  


24  another, unless only 1 inquiry is considered.                               


25      Sec. 2157.  If an insurer takes an adverse action based upon                


26  credit information, the insurer shall notify the insured or                 


27  applicant for insurance in accordance with section 615(a) of the            


1   fair credit reporting act, title VI of the consumer credit                  


2   protection act, Public Law 90-321, 15 USC 1681m, that an adverse            


3   action has been taken and shall explain in clear and specific               


4   language the reasons for the adverse action.  The reasons shall             


5   be in sufficiently clear and specific language so that an                   


6   individual can identify the basis for the insurer's decision to             


7   take an adverse action.  The notice shall include a description             


8   of up to 4 factors that were the primary influences for the                 


9   adverse action.  The use of generalized terms such as "poor                 


10  credit history", "poor credit rating", or "poor insurance score"            


11  does not meet the description requirements of this section.                 


12  Standardized credit explanations provided by consumer reporting             


13  agencies or other third party vendors do meet the description               


14  requirements of this section.  This section is not satisfied if a           


15  producer instead of the insurer provides the reasons for the                


16  adverse action.                                                             


17      Sec. 2159.  If it is determined through the dispute                         


18  resolution process set forth in the federal fair credit reporting           


19  act, section 611(a)(5) of the fair credit reporting act, title VI           


20  of the consumer credit protection act, Public Law 90-321, 15 USC            


21  1681i, that the credit information of a current insured was                 


22  incorrect or incomplete and if the insurer receives notice of               


23  this determination from either the consumer reporting agency or             


24  from the insured, the insurer shall reevaluate the insured within           


25  30 days of receiving the notice.  After reevaluating the insured,           


26  the insurer shall make any adjustments necessary, consistent with           


27  this act and its underwriting, rating guidelines, and premium               


1   discount plan.  If an insurer determines that the insured has               


2   overpaid premium, the insurer shall refund to the insured the               


3   amount of overpayment calculated back to the shorter of either              


4   the last 12 months of coverage or the actual policy period.                 


5       Sec. 2161.  An insurer shall indemnify, defend, and hold                    


6   harmless producers from and against all liability, fees, and                


7   costs arising out of or relating to the actions, errors, or                 


8   omissions of a producer who obtains or uses credit information or           


9   insurance scores for an insurer, provided the producer follows              


10  the instructions of or procedures established by the insurer and            


11  complies with any applicable law or regulation.  Nothing in this            


12  section shall be construed to provide an insured or applicant for           


13  insurance with a cause of action that does not exist in the                 


14  absence of this section.                                                    


15      Enacting section 1.  This amendatory act takes effect 90                    


16  days after the date this amendatory act is enacted.