SENATE BILL No. 884

 

 

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.