September 7, 2005, Introduced by Senator SWITALSKI 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:
CHAPTER 21A CREDIT INFORMATION AND CREDIT SCORES
Sec. 2151. As used in this chapter:
(a) "Adverse action" means a denial or cancellation of, an
increase in any charge for, or a reduction or other adverse or
unfavorable change in the terms of coverage or amount of, any
insurance, existing or applied for, in connection with the
underwriting of personal insurance and as otherwise permitted under
(b) "Consumer reporting agency" means any person which, for
monetary fees, dues, or on a cooperative nonprofit basis, regularly
engages in whole or in part in the practice of assembling or
evaluating consumer credit information or other information on
consumers for the purpose of furnishing consumer reports to third
(c) "Credit information" means any credit-related information
derived from a credit report, found on a credit report itself, or
provided on an application for personal insurance. Information that
is not credit-related shall not be considered credit information,
regardless of whether it is contained in a credit report or in an
application, or is used to calculate an insurance score.
(d) "Credit report" means any written, oral, or other
communication of information by a consumer reporting agency bearing
on a consumer's credit worthiness, credit standing, or credit
capacity used or expected to be used or collected in whole or in
part for the purpose of serving as a factor to determine, as
otherwise permitted under this act, personal insurance premiums,
eligibility for coverage or for a premium discount plan, or tier
(e) "Insurance score" means a number or rating that is derived
from an algorithm, computer application, model, or other process
that is based in whole or in part on credit information for the
purposes of predicting the future insurance loss exposure of an
individual applicant or insured.
Sec. 2153. (1) This chapter applies to all property/casualty
insurance policies written for personal, family, or household use
including automobile, home, motorcycle, mobile home, noncommercial
dwelling fire, boat, personal watercraft, snowmobile, and
recreational vehicle, whether written on an individual, group,
franchise, blanket policy, or similar basis.
(2) An insurer shall not use credit information or a credit
score for premium surcharges.
Sec. 2155. An insurer shall not use credit information or a
credit-based insurance score unless all of the following are met:
(a) The insurer or its producer discloses, at the renewal of a
policy, on an insurance application, or at the time the application
is taken, that it may obtain credit information. The disclosure
shall be either written or provided to an applicant in the same
medium as the application for insurance or notice of renewal. The
disclosure is not required to be given to an insured on a renewal
policy if the insured has previously been provided a disclosure
statement. An insurer may use the following disclosure statement:
"In connection with this application for insurance, we may
review your credit report or obtain or use a credit-based insurance
score based on the information contained in that credit report. We
may use a third party in connection with the development of your
(b) The insurer or a third party on behalf of the insurer
files with the commissioner the scoring models or other scoring
processes used. A filing that includes insurance scoring may
include loss experience justifying the use of credit information.
(c) The insurer or a third party on behalf of the insurer does
not use income, gender, address, zip code, ethnic group, religion,
marital status, or nationality of the insured or applicant for
insurance in calculating an insurance score.
(d) The insurer does not do any of the following:
(i) Deny, cancel, or nonrenew a policy solely or substantially
on the basis of credit information, without consideration of any
other applicable underwriting factor independent of credit
information and not expressly prohibited by this act.
(ii) Base an insured's premium discount or renewal rates solely
or substantially upon credit information, without consideration of
any other applicable factor independent of credit information.
(iii) Take an adverse action against a consumer solely or
substantially because he or she does not have a credit card
account, without consideration of any other applicable factor
independent of credit information.
(e) The insurer or a third party on behalf of the insurer does
not consider an absence of credit information or an inability to
calculate an insurance score unless the insurer or third party on
behalf of the insurer treats the consumer as otherwise approved by
the commissioner and the insurer presents information to the
commissioner that such an absence or inability relates to the
(f) The insurer or a third party on the insurer's behalf uses
a credit report issued or an insurance score calculated within 90
days from the date the policy is first written or renewed.
(g) Not later than every 36 months following the last time the
insurer or a third party on the insurer's behalf obtained current
credit information for the insured, the insurer or a third party on
the insurer's behalf recalculates the insurance score or obtains an
updated credit report subject to all of the following:
(i) Upon request of an insured or the insured's producer at
annual renewal, an insurer or a third party on the insurer's behalf
shall reexamine a current credit report or insurance score. An
insurer or a third party on the insurer's behalf is not required to
recalculate the insurance score or obtain an updated credit report
more frequently than once in a 12-month period.
(ii) An insurer or a third party on the insurer's behalf may
order a credit report upon any renewal before 36 months if the
insurer does so consistently with all its insureds.
(iii) Notwithstanding subparagraph (i), an insurer or a third
party on the insurer's behalf is not required to obtain current
credit information for an insured if 1 of the following applies:
(A) The insurer is treating the consumer as otherwise approved
by the commissioner.
(B) The insured is in the most favorably-priced tier of the
insurer. However, the insurer shall have the discretion to order
the report, if consistent with its underwriting guidelines.
(C) Credit was not used for underwriting or rating the insured
when the policy was initially written. However, the insurer may use
credit for underwriting, a premium discount plan, or rating the
insured upon renewal, if consistent with its underwriting
guidelines and this act.
(D) The insurer reevaluates the insured beginning no later
than 36 months after inception and thereafter based upon other
underwriting, premium discount plan, or rating factors as permitted
under this act, excluding credit information.
(h) The insurer or a third party on the insurer's behalf does
not use the following as a negative factor in any insurance score
or in reviewing credit information:
(i) Credit inquiries not initiated by the consumer or requested
by the consumer for his or her own credit information.
(ii) Credit inquiries relating to insurance coverage, if so
identified on an insured's or applicant's credit report.
(iii) Collection accounts with a medical industry code, if so
identified on the consumer's credit report.
(iv) Multiple lender inquiries, if coded by the consumer
reporting agency on the credit report as being from the home
mortgage industry and made within 45 days from one another, unless
only 1 inquiry is considered.
(v) Multiple lender inquiries, if coded by the consumer
reporting agency on the credit report as being from the automobile
lending industry and made within 45 days of one another, unless
only 1 inquiry is considered.
Sec. 2157. If an insurer takes an adverse action based upon
credit information, the insurer shall notify the insured or
applicant for insurance in accordance with 15 USC 1681m, that an
adverse action has been taken and shall explain in clear and
specific language the reasons for the adverse action. The reasons
shall be in sufficiently clear and specific language so that an
individual can identify the basis for the insurer's decision to
take an adverse action. The notice shall include a description of
up to 4 factors that were the primary influences for the adverse
action. The use of generalized terms such as "poor credit history",
"poor credit rating", or "poor insurance score" does not meet the
description requirements of this section. Standardized credit
explanations provided by consumer reporting agencies or other third
party vendors do meet the description requirements of this section.
This section is not satisfied if a producer instead of the insurer
provides the reasons for the adverse action.
Sec. 2159. If it is determined through the dispute resolution
process set forth in 15 USC 1681i, that the credit information of a
current insured was incorrect or incomplete and if the insurer
receives notice of this determination from either the consumer
reporting agency or from the insured, the insurer shall reevaluate
the insured within 30 days of receiving the notice. After
reevaluating the insured, the insurer shall make any adjustments
necessary, consistent with this act and its underwriting, rating
guidelines, and premium discount plan. If an insurer determines
that the insured has overpaid premium, the insurer shall refund to
the insured the amount of overpayment calculated back to the
shorter of either the last 12 months of coverage or the actual
Sec. 2161. An insurer shall indemnify, defend, and hold
harmless producers from and against all liability, fees, and costs
arising out of or relating to the actions, errors, or omissions of
a producer who obtains or uses credit information or insurance
scores for an insurer, if the producer follows the instructions of
or procedures established by the insurer and complies with any
applicable law or regulation. Nothing in this section shall be
construed to provide an insured or applicant for insurance with a
cause of action that would not exist in the absence of this
Enacting section 1. This amendatory act takes effect 90 days
after the date this amendatory act is enacted.