Citations Affected:
IC 27-2-21.
Synopsis: Credit scoring. Imposes several requirements on an insurer's
use of credit information in the underwriting of personal property and
casualty insurance.
Effective: July 1, 2003.
January 8, 2003, read first time and referred to Committee on Insurance, Corporations and
Small Business.
A BILL FOR AN ACT to amend the Indiana Code concerning
insurance.
(as defined in
IC 27-1-2-3
) that issues a personal insurance policy.
Sec. 14. As used in this chapter, "personal insurance policy"
means a policy that:
(1) provides one (1) or more of the kinds of insurance
described in Class 2 or Class 3 of
IC 27-1-5-1
; and
(2) is underwritten on an individual basis for personal, family,
or household use.
Sec. 15. This chapter does not apply to commercial insurance.
Sec. 16. An insurer that uses credit information to underwrite
or rate risks shall not do the following:
(1) Use an insurance score that is calculated using income,
gender, address, ZIP code, ethnic group, religion, marital
status, or nationality of the consumer as a factor.
(2) Deny, cancel, or decline to renew a personal insurance
policy solely on the basis of credit information.
(3) Base an insured's renewal rate for a personal insurance
policy solely on credit information.
(4) Take an adverse action against a consumer solely because
the consumer does not have a credit card account.
(5) Consider an absence of credit information or an inability
to calculate an insurance score in underwriting or rating a
personal insurance policy, unless the insurer does one (1) of
the following:
(A) Presents to the commissioner information that the
absence or inability relates to the risk for the insurer and
treats the consumer as approved by the commissioner.
(B) Treats the consumer as if the consumer had neutral
credit information as defined by the insurer.
(C) Excludes the use of credit information as a factor.
(6) Take an adverse action against a consumer based on credit
information unless the insurer obtains and uses:
(A) a credit report issued; or
(B) an insurance score calculated;
not more than ninety (90) days after the date the personal
insurance policy is first written or the renewal is issued.
(7) Use credit information unless the insurer recalculates the
insurance score or obtains an updated credit report at least
every thirty-six (36) months. However, the following apply:
(A) At annual renewal, upon the request of an insured or
the insured's agent, the insurer shall re-underwrite and
re-rate the personal insurance policy based on a current
credit report or insurance score unless one (1) of the
following applies:
(i) The insurer's treatment of the consumer is approved
by the commissioner.
(ii) The insured is in the most favorably priced tier of the
insurer, within a group of affiliated insurers.
(iii) Credit information was not used for underwriting or
rating the insured when the personal insurance policy
was initially written.
(iv) The insurer reevaluates the insured at least every
thirty-six (36) months after a personal insurance policy
is issued based on underwriting or rating factors other
than credit information.
This clause does not require an insurer to recalculate an
insurance score or obtain an updated credit report of a
consumer more frequently than one (1) time in a twelve
(12) month period.
(B) An insurer may obtain current credit information upon
the renewal of a personal insurance policy when renewal
occurs more frequently than every thirty-six (36) months
if consistent with the insurer's underwriting guidelines.
(8) Use the following as a negative factor in an insurance
scoring methodology or in reviewing credit information for
the purpose of underwriting or rating a personal insurance
policy:
(A) A credit inquiry not initiated or requested by the
consumer for the consumer's own credit information.
(B) An inquiry relating to insurance coverage.
(C) A collection account with a medical industry code on
the consumer's credit report.
(D) Multiple lender inquiries:
(i) coded by the consumer reporting agency on the
consumer's credit report as being from the home
mortgage industry; and
(ii) made within thirty (30) days of one another.
(E) Multiple lender inquiries:
(i) coded by the consumer reporting agency on the
consumer's credit report as being from the automobile
lending industry; and
(ii) made within thirty (30) days of one another.
Sec. 17. (a) If:
(1) a determination is made through the dispute resolution
process set forth in the federal Fair Credit Reporting Act, 15
U.S.C. 1681i(a)(5) that the credit information of a current
insured was incorrect or incomplete; and
(2) the insurer receives notice of the determination from the
consumer reporting agency or the insured;
the insurer shall re-underwrite and re-rate the insured not more
than thirty (30) days after receiving the notice.
(b) After an insurer re-underwrites or re-rates an insured as
described in subsection (a), the insurer shall:
(1) make necessary adjustments, consistent with the insurer's
underwriting and rating guidelines; and
(2) if the insurer determines that the insured has overpaid a
premium, refund to the insured the amount of overpayment
calculated back to the shorter of the:
(A) immediately preceding twelve (12) month period of
coverage; or
(B) actual policy period.
Sec. 18. (a) If an insurer uses credit information in underwriting
or rating a consumer, the insurer or the insurer's agent shall
disclose, either on the insurance application or at the time the
insurance application is taken, that the insurer may obtain credit
information in connection with the application. The disclosure
must be:
(1) written; or
(2) provided to the consumer in the same medium as the
application for insurance.
The insurer is not required to provide the disclosure statement
required under this section to an insured on a renewal policy if the
insured has previously been provided a disclosure statement.
(b) Use of the following sample disclosure statement constitutes
compliance with this section: "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.".
Sec. 19. (a) If an insurer takes an adverse action based on credit
information, the insurer shall:
(1) provide notice to the consumer that an adverse action has
been taken, in accordance with the requirements of the
federal Fair Credit Reporting Act, 15 U.S.C. 1681m(a)l; and
(2) provide notice to the consumer explaining the reason for
the adverse action.
(b) The reason provided under subsection (a) must be provided
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 must include a description of at least the four (4)
primary factors that were the primary influences of the adverse
action. The use of generalized terms such as "poor credit history",
"poor credit rating", or "poor insurance score" does not meet
requirements of this subsection. A standardized credit explanation
provided by a consumer reporting agency or other third party
vendor meets the requirements of this section.
Sec. 20. (a) An insurer that uses an insurance score to
underwrite and rate risks shall file the insurer's scoring models or
other scoring processes with the department.
(b) A third party may file a scoring model or scoring process on
behalf of an insurer.
(c) A filing that includes insurance scoring may include loss
experience justifying the use of credit information.
(d) A filing related to credit information is confidential.
Sec. 21. (a) An insurer shall indemnify and defend an insurance
producer and hold an insurance producer harmless from and
against liability, fees, and costs arising out of or related to the
actions, errors, or omissions of the insurance producer, if the
insurance producer:
(1) obtains or uses credit information or insurance scores for
the insurer;
(2) follows the instructions of or procedures established by the
insurer; and
(3) complies with applicable laws and regulations.
(b) This section does not provide a consumer with a cause of
action that does not exist in the absence of this section.
Sec. 22. (a) A consumer reporting agency may not provide or
sell data or lists that include information submitted in conjunction
with:
(1) an insurance inquiry about a consumer's credit
information; or
(2) a request for a credit report or insurance score;
including the expiration dates of an insurance policy or other
information that may identify periods during which a consumer's
insurance expires and the terms and conditions of the consumer's
insurance coverage.
(b) The restrictions under subsection (a) do not apply to data or
lists a consumer reporting agency supplies to an:
(1) insurance producer from whom the information was
received;
(2) insurer on behalf of which the insurance producer
described in subdivision (1) acted; or
(3) affiliates or holding companies of the insurer described in
subdivision (2).
(c) This section does not prohibit an insurer from obtaining a
claim history report or a motor vehicle report.