November 3, 2010, Introduced by Senators BARCIA and CROPSEY and referred to the Committee on Economic Development and Regulatory Reform.
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. (1) As used in this chapter:
(a) "Adverse action" means a denial or cancellation of
personal insurance coverage or an increase in any charge for, or a
reduction or other adverse or unfavorable change in the terms of
coverage or amount of, any personal insurance, existing or applied
(b) "Consumer reporting agency" means any person which, for
monetary fees or 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 in the rating or
underwriting of personal insurance.
(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.
(f) "Personal insurance" means property/casualty insurance
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 an
insurance score as any part of a decision to deny, cancel, or
nonrenew a personal insurance policy under chapter 24 or 26. An
insurer shall not apply credit information or a credit-based
insurance score in the rating or underwriting of personal insurance
that is otherwise permitted under this act unless all of the
following are met:
(a) The insurer or its producer discloses, either on the
insurance application or at the time the application is taken, that
it may obtain credit information in connection with the
application. This disclosure shall be either written or provided to
an applicant in the same medium as the application for insurance.
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 does
not use income, gender, address, zip code, ethnic group, religion,
marital status, or nationality of the insured or insurance
applicant in calculating an insurance score.
(c) The insurer does not take an adverse action against a
consumer solely because he or she does not have a credit card
account, without consideration of any other applicable factor
independent of credit information.
(d) 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 in the rating of personal insurance
unless any resulting rate differential is reasonably justified by
differences in losses, expenses, or both, or the insured or
insurance applicant is treated as having the most favorable
insurance score available.
(e) The insurer or a third party on the insurer's behalf uses
a credit report issued within 90 days before the date an insurance
score based on that credit report is first applied to the insured.
(f) The insurer or a third party on the insurer's behalf
recalculates the insurance score or obtains an updated credit
report not later than every 36 months following the last time that
the insurer or third party obtained current credit information. An
insurer or a third party on the insurer's behalf may order a credit
report upon any renewal if the insurer does so consistently with
all its insureds.
(g) 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 a new credit report more
frequently than once in a 12-month period. However, an insurer or a
third party on the insurer's behalf is not required to reexamine a
current credit report or insurance score if 1 of the following
(i) The insurer is treating the insured or insurance applicant
as otherwise approved by the commissioner.
(ii) The insured or insurance applicant is treated as having
the most favorable insurance score available, within a group of
affiliated insurers. However, the insurer may order a credit report
if the insurer does so consistently with all its insureds.
(iii) Credit was not used for underwriting or rating the insured
when the policy was initially written. However, the insurer may use
credit for underwriting or rating the insured upon renewal, if the
insurer does so consistently with all its insureds.
(iv) The insurer or a third party on the insurer's behalf
reevaluates the insured beginning no later than 36 months after
inception and thereafter based upon underwriting or rating factors,
excluding credit information.
(h) For insurance scores calculated or recalculated on or
after January 1, 2011, 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 insurance applicant's credit report.
(iii) Multiple lender inquiries, if coded by the consumer
reporting agency on the credit report as being from the home
mortgage industry and made within 30 days of one another, unless
only 1 inquiry is considered.
(iv) Multiple lender inquiries, if coded by the consumer
reporting agency on the credit report as being from the automobile
lending industry and made within 30 days of one another, unless
only 1 inquiry is considered.
(v) The number, if under 3, of credit or charge card accounts
opened by a consumer in the immediately preceding 12 months.
(vi) An action commenced by or against the consumer under the
bankruptcy code, 11 USC 101 to 1330, if the date of the order for
relief or the date of adjudication, as applicable, in that action
is more than 10 years before the date of the credit report.
(vii) Collection accounts with a medical industry code, if so
identified on the consumer's credit report.
(i) The insurer or a third party on behalf of the insurer does
not calculate an insurance score by differentiating on whether an
insured's or insurance applicant's accounts are maintained at a
state or nationally chartered bank or a state or federally
chartered savings and loan association, savings bank, or credit
Sec. 2153. (1) Notwithstanding any other law, rule, or
regulation, an insurer that uses credit information shall, on
written request from an insured or insurance applicant, provide
reasonable exceptions to the insurer's rates, rating
classifications, company or tier placement, or underwriting rules
or guidelines for an insured or insurance applicant who has
experienced and whose credit information has been directly
influenced by any of the following events:
(a) Catastrophic event, as declared by the federal or state
(b) Serious illness or injury, or serious illness or injury to
an immediate family member.
(c) Death of a spouse, child, or parent.
(d) Divorce or involuntary interruption of legally owned
alimony or support payments.
(e) Identity theft.
(f) Temporary loss of employment for a period of 3 months or
more, if it results from involuntary termination.
(g) Military deployment overseas.
(h) Other events, as determined by the insurer.
(2) If an insured or insurance applicant submits a request for
an exception under subsection (1), an insurer may, but is not
required to do, any of the following:
(a) Require a reasonable written and independently verifiable
documentation of the event.
(b) Require the insured or insurance applicant to demonstrate
that the event had direct and meaningful impact on the insured's or
insurance applicant's credit information.
(c) Require a request to be made no more than 60 days from the
date of the application for insurance or the policy renewal.
(d) Grant an exception even if the insured or insurance
applicant did not provide an initial request for an exception in
(e) Grant an exception where the insured or insurance
applicant asks for consideration of repeated events or the insurer
has considered this event previously.
(3) An insurer does not violate any law, rule, or regulation
relating to underwriting, rating, or rate filing as a result of
granting an exception under this section.
(4) The insurer shall provide notice to insureds and insurance
applicants that reasonable exceptions are available and information
about how to inquire further.
(5) Within 30 days of the insurer's receipt of sufficient
documentation of an event described in subsection (1), the insurer
shall inform the insured or insurance applicant of the outcome of
his or her request for a reasonable exception. This communication
shall be in writing or provided in the same medium as the request
for a reasonable exception.
Sec. 2155. (1) An insurer that applies credit information or a
credit-based insurance score in the rating or underwriting of
personal insurance shall file, or a third party on behalf of the
insurer shall file, the insurer's scoring models and processes with
the commissioner. A filing that includes insurance scoring may
include loss experience justifying the use of credit information.
(2) Any filing relating to credit information is privileged
and not subject to the freedom of information act, 1976 PA 442, MCL
15.231 to 15.246.
Sec. 2157. (1) An insurer or a third party on behalf of an
insurer shall not do business with any credit reporting agency that
provides or sells data or lists that include any information that
in whole or in part was submitted in conjunction with an insurance
inquiry about an insured's or insurance applicant's credit
information or a request for a credit report or insurance score.
This information includes, but is not limited to, the expiration
dates of an insurance policy or other information that may identify
time periods during which an insured's insurance policy may expire
and the terms and conditions of the coverage.
(2) Subsection (1) does not apply to data or lists the
consumer reporting agency supplies to the insurer or the insurance
producer from whom information was received or the insurer's
affiliates or holding companies.
(3) This section does not restrict an insurer from obtaining a
claims history report or motor vehicle report.
Sec. 2158. (1) 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(a), that an
adverse action has been taken and shall provide notice in clear and
specific language of the reasons for the adverse action, including
a description of all factors that were the primary influences for
the adverse action. However, not more than 4 factors that were the
primary influences for the adverse action need to be given. 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 subsection. Standardized credit explanations
provided by consumer reporting agencies or other third party
vendors meet the description requirements of this subsection.
(2) If it is determined through the dispute resolution process
set forth in 15 USC 1681i(a) 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 the insurer's 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. 2159. (1) Nothing in this chapter shall be construed to
provide an insured or applicant for insurance with a cause of
action that does not exist in the absence of this chapter.
(2) 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 resulting from the use of credit information or insurance
scores for the insurer, provided that the producer follows the
procedures and instructions established by the insurer and complies
with all applicable laws and regulations.
Enacting section 1. This amendatory act takes effect January