Senate File 283 - Introduced
SENATE FILE
BY QUIRMBACH, BOLKCOM, STEWART,
HATCH, BEALL, KREIMAN, RAGAN,
CONNOLLY, DVORSKY, DANIELSON,
DOTZLER, SENG, SCHOENJAHN,
GRONSTAL, COURTNEY, McCOY,
FRAISE, APPEL, SCHMITZ,
DEARDEN, HECKROTH, HANCOCK,
KIBBIE, and WOOD
(COMPANION TO HF 216 BY FORD)
Passed Senate, Date Passed House, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act prohibiting the use of credit information for underwriting
2 or rating risks for personal insurance and providing penalties
3 and an applicability date.
4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
5 TLSB 1627SS 82
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PAG LIN
1 1 Section 1. Section 507B.4, Code 2007, is amended by adding
1 2 the following new subsection:
1 3 NEW SUBSECTION. 19. USE OF CREDIT INFORMATION. Any
1 4 violation of section 515.109A.
1 5 Sec. 2. Section 515.109A, subsections 1 and 2, Code 2007,
1 6 are amended to read as follows:
1 7 1. DEFINITIONS. As used in this section unless the
1 8 context otherwise requires:
1 9 a. "Adverse action" means a denial of issuance,
1 10 cancellation, or refusal to renew, an increase in any charge
1 11 for, or a reduction or other unfavorable change in the terms
1 12 of coverage or amount of any personal insurance existing or
1 13 applied for, or in connection with the underwriting of
1 14 personal insurance.
1 15 b. "Affiliate" means any company that controls, is
1 16 controlled by, or is under common control with another
1 17 company.
1 18 c. b. "Applicant" means an individual who has applied to
1 19 be covered by a personal insurance policy with an insurer.
1 20 d. c. "Consumer" means an insured whose credit
1 21 information is used or whose insurance score is calculated in
1 22 the underwriting or rating of a personal insurance policy or
1 23 an applicant for such a personal insurance policy.
1 24 e. d. "Consumer reporting agency" means any person that,
1 25 for monetary fees, dues, or on a cooperative nonprofit basis,
1 26 regularly engages in whole or in part in the practice of
1 27 assembling or evaluating consumer credit information or other
1 28 information concerning consumers for the purpose of furnishing
1 29 consumer credit reports to third parties.
1 30 f. e. "Credit information" means any information related
1 31 to credit that is contained in or derived from a credit
1 32 report, or provided in an application for personal insurance.
1 33 Information that is not related to credit shall not be
1 34 considered "credit information" regardless of whether the
1 35 information is contained in or derived from a credit report or
2 1 an application for credit or is used to calculate an insurance
2 2 score.
2 3 g. f. "Credit report" means any written, oral, or other
2 4 communication of information by a consumer reporting agency
2 5 that relates to a consumer's creditworthiness, credit
2 6 standing, or credit capacity and that is used or expected to
2 7 be used or is collected, in whole or in part, for the purpose
2 8 of serving as a factor in determining personal insurance
2 9 premiums, eligibility for personal insurance coverage, or tier
2 10 placement.
2 11 h. g. "Insurance score" means a number or rating that is
2 12 derived from an algorithm, computer application, model, or
2 13 other process that is based in whole or in part on credit
2 14 information for the purposes of predicting the future
2 15 insurance loss exposure of a consumer.
2 16 i. h. "Insured" means an individual who is covered by a
2 17 personal insurance policy.
2 18 j. i. "Personal insurance" means personal insurance and
2 19 not commercial insurance and is limited to private passenger
2 20 automobile, homeowners, farm owners, personal farm liability,
2 21 motorcycle, mobile home owners, noncommercial dwelling fire,
2 22 boat, personal watercraft, snowmobile, and recreational
2 23 vehicle insurance policies, that are individually underwritten
2 24 for personal, family, farm, or household use. No other type
2 25 of insurance is included as personal insurance for the
2 26 purposes of this section.
2 27 2. USE OF CREDIT INFORMATION == PROHIBITED. An insurer
2 28 authorized to do business in Iowa that uses shall not use
2 29 credit information to underwrite or rate risks for a policy of
2 30 personal insurance shall not do including but not limited to
2 31 doing any of the following:
2 32 a. Use Using an insurance score that is calculated using
2 33 income, gender, address, zip code, ethnic group, religion,
2 34 marital status, race, or nationality of a consumer as a
2 35 factor.
3 1 b. Deny Denying issuance, cancel canceling, or refuse
3 2 refusing to renew a policy of personal insurance solely based
3 3 on the basis any consideration of credit information, without
3 4 consideration of any other applicable underwriting factors
3 5 independent of credit information that are not otherwise
3 6 prohibited under paragraph "a".
3 7 c. Base Basing a consumer's renewal rates for personal
3 8 insurance solely on the basis any consideration of credit
3 9 information, without consideration of any other applicable
3 10 underwriting factors independent of credit information that
3 11 are not otherwise prohibited under paragraph "a".
3 12 d. Take Taking adverse action against a consumer solely
3 13 because based on any consideration of the fact that the
3 14 consumer does not have a credit card account, without
3 15 consideration of any other applicable underwriting factors
3 16 independent of credit information that are not otherwise
3 17 prohibited under paragraph "a".
3 18 e. Consider Considering an absence of credit information
3 19 or an inability to calculate an insurance score in
3 20 underwriting or rating personal insurance unless the insurer
3 21 does one of the following:.
3 22 (1) Treats the consumer as if the consumer has neutral
3 23 credit information, as defined by the insurer.
3 24 (2) Excludes the use of credit information as an
3 25 underwriting factor and only uses other underwriting criteria.
3 26 f. Take Taking adverse action against a consumer based on
3 27 credit information, unless the insurer obtains and uses a
3 28 credit report issued or an insurance score calculated within
3 29 ninety days before the date a personal insurance policy is
3 30 first written or a renewal is issued.
3 31 g. Use credit information unless not later than every
3 32 thirty=six months following the last time that the insurer
3 33 obtained current credit information for the insured, the
3 34 insurer recalculates the insurance score or obtains an updated
3 35 credit report for the insured. Regardless of the requirements
4 1 of this paragraph:
4 2 (1) At annual renewal, upon the request of the consumer or
4 3 the consumer's agent, the insurer shall re=underwrite and
4 4 re=rate the personal insurance policy based upon a current
4 5 credit report or insurance score. An insurer is not required
4 6 to recalculate an insurance score or obtain a current credit
4 7 report more than once in a twelve=month period.
4 8 (2) The insurer shall have the discretion to obtain
4 9 current credit information for a consumer more frequently than
4 10 every thirty=six months, if consistent with the insurer's
4 11 underwriting guidelines.
4 12 (3) Notwithstanding subparagraph (1), an insurer is not
4 13 required to obtain current credit information for a consumer
4 14 if any of the following applies:
4 15 (a) The insurer is treating the consumer as otherwise
4 16 approved by the commissioner of insurance.
4 17 (b) The consumer is in the most favorably priced tier of
4 18 the insurer, within a group of affiliated insurers. However,
4 19 the insurer shall have the discretion to obtain current credit
4 20 information, if consistent with the insurer's underwriting
4 21 guidelines.
4 22 (c) Credit information was not used for underwriting or
4 23 rating the insured when the personal insurance policy was
4 24 initially written. However, the insurer shall have the
4 25 discretion to use current credit information for underwriting
4 26 or rating the insured upon renewal of the policy, if
4 27 consistent with the insurer's underwriting guidelines.
4 28 (d) The insurer reevaluates the insured beginning no later
4 29 than thirty=six months after the personal insurance policy was
4 30 initially written and thereafter, based on other underwriting
4 31 or rating factors, excluding credit information.
4 32 h. g. Use Using any of the following as a negative factor
4 33 in any insurance scoring methodology or in reviewing credit
4 34 information used for the purpose of underwriting or rating a
4 35 personal insurance policy:
5 1 (1) Credit inquiries not initiated by the consumer or
5 2 inquiries requested by the consumer for the consumer's own
5 3 credit information.
5 4 (2) Inquiries relating to insurance coverage, if so
5 5 identified on a consumer's credit report.
5 6 (3) Collection accounts with a medical industry code, if
5 7 so identified on a consumer's credit report.
5 8 (4) Multiple lender inquiries, if coded by a consumer
5 9 reporting agency on the consumer's credit report as being from
5 10 the home mortgage industry and made within thirty days of one
5 11 another, unless only one inquiry is considered.
5 12 (5) Multiple lender inquiries, if coded by a consumer
5 13 reporting agency on the consumer's credit report as being from
5 14 the automobile lending industry and made within thirty days of
5 15 one another, unless only one inquiry is considered.
5 16 Sec. 3. Section 515.109A, subsections 3 through 8, Code
5 17 2007, are amended by striking the subsections.
5 18 Sec. 4. Section 515.109A, subsection 9, Code 2007, is
5 19 amended by striking the subsection and inserting in lieu
5 20 thereof the following:
5 21 9. VIOLATIONS. A violation of this section is an unfair
5 22 insurance practice as provided in chapter 507B.
5 23 Sec. 5. Section 515.109A, subsection 10, Code 2007, is
5 24 amended to read as follows:
5 25 10. APPLICABILITY DATE. This section applies to personal
5 26 insurance contracts or policies delivered, issued for
5 27 delivery, continued, or renewed in this state on or after
5 28 October 1, 2004 2007.
5 29 EXPLANATION
5 30 This bill amends Code section 515.109A to prohibit the use
5 31 of credit information by insurers for underwriting or rating
5 32 risks for personal insurance. Currently, the use of credit
5 33 information for such purposes is allowed under certain
5 34 circumstances.
5 35 Uses of credit information prohibited by the bill include
6 1 using an insurance score; denying issuance, canceling, or
6 2 refusing to renew a personal insurance policy based on any
6 3 consideration of credit information; basing a consumer's
6 4 insurance renewal rates on any consideration of credit
6 5 information; taking any adverse action against a consumer
6 6 based on any consideration of the fact that the consumer does
6 7 not have a credit card account; considering an absence of
6 8 credit information or an inability to calculate an insurance
6 9 score in underwriting or rating personal insurance; and taking
6 10 any adverse action against a consumer based on credit
6 11 information. For purposes of the bill, "adverse action" means
6 12 a denial of issuance, cancellation, or refusal to renew, an
6 13 increase in any charge for, or a reduction or other
6 14 unfavorable change in the terms of coverage or amount of any
6 15 personal insurance existing or applied for, or in connection
6 16 with, the underwriting of personal insurance.
6 17 The bill provides that a violation of Code section 515.109A
6 18 is an unfair insurance practice as provided in Code chapter
6 19 507B and the proceedings, orders, and penalties contained in
6 20 Code chapter 507B are applicable to violations of the bill.
6 21 The bill is applicable to personal insurance contracts or
6 22 policies delivered, issued for delivery, continued, or renewed
6 23 in this state on or after October 1, 2007.
6 24 LSB 1627SS 82
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