SENATE BILL No. 1555

 

 

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

 

for.

 

     (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

 

parties.

 

     (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

 

insurance score.".

 

     (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

 

applies:

 

     (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

 

union.

 

     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

 

government.

 

     (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

 

writing.

 

     (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

 

policy period.

 

     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

 

1, 2011.