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PAG LIN
1 1 SENATE FILE 2257
1 2
1 3 AN ACT
1 4 RELATING TO THE USE OF CREDIT INFORMATION FOR UNDERWRITING
1 5 OR RATING RISKS FOR PERSONAL INSURANCE AND PROVIDING AN
1 6 APPLICABILITY DATE.
1 7
1 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 9
1 10 Section 1. NEW SECTION. 515.109A USE OF CREDIT
1 11 INFORMATION – PERSONAL INSURANCE.
1 12 1. DEFINITIONS. As used in this section unless the
1 13 context otherwise requires:
1 14 a. "Adverse action" means a denial of issuance,
1 15 cancellation, or refusal to renew, an increase in any charge
1 16 for, or a reduction or other unfavorable change in the terms
1 17 of coverage or amount of any personal insurance existing or
1 18 applied for, or in connection with the underwriting of
1 19 personal insurance.
1 20 b. "Affiliate" means any company that controls, is
1 21 controlled by, or is under common control with another
1 22 company.
1 23 c. "Applicant" means an individual who has applied to be
1 24 covered by a personal insurance policy with an insurer.
1 25 d. "Consumer" means an insured whose credit information is
1 26 used or whose insurance score is calculated in the
1 27 underwriting or rating of a personal insurance policy or an
1 28 applicant for such a personal insurance policy.
1 29 e. "Consumer reporting agency" means any person that, for
1 30 monetary fees, dues, or on a cooperative nonprofit basis,
1 31 regularly engages in whole or in part in the practice of
1 32 assembling or evaluating consumer credit information or other
1 33 information concerning consumers for the purpose of furnishing
1 34 consumer credit reports to third parties.
1 35 f. "Credit information" means any information related to
2 1 credit that is contained in or derived from a credit report,
2 2 or provided in an application for personal insurance.
2 3 Information that is not related to credit shall not be
2 4 considered "credit information" regardless of whether the
2 5 information is contained in or derived from a credit report or
2 6 an application for credit or is used to calculate an insurance
2 7 score.
2 8 g. "Credit report" means any written, oral, or other
2 9 communication of information by a consumer reporting agency
2 10 that relates to a consumer's creditworthiness, credit
2 11 standing, or credit capacity and that is used or expected to
2 12 be used or is collected, in whole or in part, for the purpose
2 13 of serving as a factor in determining personal insurance
2 14 premiums, eligibility for personal insurance coverage, or tier
2 15 placement.
2 16 h. "Insurance score" means a number or rating that is
2 17 derived from an algorithm, computer application, model, or
2 18 other process that is based in whole or in part on credit
2 19 information for the purposes of predicting the future
2 20 insurance loss exposure of a consumer.
2 21 i. "Insured" means an individual who is covered by a
2 22 personal insurance policy.
2 23 j. "Personal insurance" means personal insurance and not
2 24 commercial insurance and is limited to private passenger
2 25 automobile, homeowners, farm owners, personal farm liability,
2 26 motorcycle, mobile home owners, noncommercial dwelling fire
2 27 insurance, boat, personal watercraft, snowmobile, and
2 28 recreational vehicle policies, that are individually
2 29 underwritten for personal, family, farm, or household use. No
2 30 other type of insurance is included as personal insurance for
2 31 the purposes of this section.
2 32 2. USE OF CREDIT INFORMATION. An insurer authorized to do
2 33 business in Iowa that uses credit information to underwrite or
2 34 rate risks for a policy of personal insurance shall not do any
2 35 of the following:
3 1 a. Use an insurance score that is calculated using income,
3 2 gender, address, zip code, ethnic group, religion, marital
3 3 status, race, or nationality of a consumer as a factor.
3 4 b. Deny issuance, cancel, or refuse to renew a policy of
3 5 personal insurance solely on the basis of credit information,
3 6 without consideration of any other applicable underwriting
3 7 factors independent of credit information that are not
3 8 otherwise prohibited under paragraph "a".
3 9 c. Base a consumer's renewal rates for personal insurance
3 10 solely on the basis of credit information, without
3 11 consideration of any other applicable underwriting factors
3 12 independent of credit information that are not otherwise
3 13 prohibited under paragraph "a".
3 14 d. Take adverse action against a consumer solely because
3 15 the consumer does not have a credit card account, without
3 16 consideration of any other applicable underwriting factors
3 17 independent of credit information that are not otherwise
3 18 prohibited under paragraph "a".
3 19 e. Consider an absence of credit information or an
3 20 inability to calculate an insurance score in underwriting or
3 21 rating personal insurance unless the insurer does one of the
3 22 following:
3 23 (1) Treats the consumer as if the consumer has neutral
3 24 credit information, as defined by the insurer.
3 25 (2) Excludes the use of credit information as an
3 26 underwriting factor and only uses other underwriting criteria.
3 27 f. Take adverse action against a consumer based on credit
3 28 information, unless the insurer obtains and uses a credit
3 29 report issued or an insurance score calculated within ninety
3 30 days before the date a personal insurance policy is first
3 31 written or a renewal is issued.
3 32 g. Use credit information unless not later than every
3 33 thirty-six months following the last time that the insurer
3 34 obtained current credit information for the insured, the
3 35 insurer recalculates the insurance score or obtains an updated
4 1 credit report for the insured. Regardless of the requirements
4 2 of this paragraph:
4 3 (1) At annual renewal, upon the request of the consumer or
4 4 the consumer's agent, the insurer shall re-underwrite and re-
4 5 rate the personal insurance policy based upon a current credit
4 6 report or insurance score. An insurer is not required to
4 7 recalculate an insurance score or obtain a current credit
4 8 report more than once in a twelve-month period.
4 9 (2) The insurer shall have the discretion to obtain
4 10 current credit information for a consumer more frequently than
4 11 every thirty-six months, if consistent with the insurer's
4 12 underwriting guidelines.
4 13 (3) Notwithstanding subparagraph (1), an insurer is not
4 14 required to obtain current credit information for a consumer
4 15 if any of the following applies:
4 16 (a) The insurer is treating the consumer as otherwise
4 17 approved by the commissioner of insurance.
4 18 (b) The consumer is in the most favorably priced tier of
4 19 the insurer, within a group of affiliated insurers. However,
4 20 the insurer shall have the discretion to obtain current credit
4 21 information, if consistent with the insurer's underwriting
4 22 guidelines.
4 23 (c) Credit information was not used for underwriting or
4 24 rating the insured when the personal insurance policy was
4 25 initially written. However, the insurer shall have the
4 26 discretion to use current credit information for underwriting
4 27 or rating the insured upon renewal of the policy, if
4 28 consistent with the insurer's underwriting guidelines.
4 29 (d) The insurer reevaluates the insured beginning no later
4 30 than thirty-six months after the personal insurance policy was
4 31 initially written and thereafter, based on other underwriting
4 32 or rating factors, excluding credit information.
4 33 h. Use any of the following as a negative factor in any
4 34 insurance scoring methodology or in reviewing credit
4 35 information for the purpose of underwriting or rating a
5 1 personal insurance policy:
5 2 (1) Credit inquiries not initiated by the consumer or
5 3 inquiries requested by the consumer for the consumer's own
5 4 credit information.
5 5 (2) Inquiries relating to insurance coverage, if so
5 6 identified on a consumer's credit report.
5 7 (3) Collection accounts with a medical industry code, if
5 8 so identified on a consumer's credit report.
5 9 (4) Multiple lender inquiries, if coded by a consumer
5 10 reporting agency on the consumer's credit report as being from
5 11 the home mortgage industry and made within thirty days of one
5 12 another, unless only one inquiry is considered.
5 13 (5) Multiple lender inquiries, if coded by a consumer
5 14 reporting agency on the consumer's credit report as being from
5 15 the automobile lending industry and made within thirty days of
5 16 one another, unless only one inquiry is considered.
5 17 3. DISPUTE RESOLUTION AND ERROR CORRECTION. If it is
5 18 determined through the dispute resolution process set forth
5 19 under the federal Fair Credit Reporting Act, 15 U.S.C. }
5 20 1681i(a)(5), that the credit information of a current insured
5 21 is incorrect or incomplete and the insurer receives notice of
5 22 such determination from either the consumer reporting agency
5 23 or from the insured, the insurer shall re-underwrite and re-
5 24 rate the insured within thirty days of receiving the notice.
5 25 After re-underwriting or re-rating the insured, the insurer
5 26 shall make any adjustments necessary, consistent with the
5 27 insurer's underwriting and rating guidelines. If an insurer
5 28 determines that an insured has overpaid premium on a personal
5 29 insurance policy, the insurer shall refund the amount of the
5 30 overpayment to the insured, calculated for either the last
5 31 twelve months of coverage or the actual policy period,
5 32 whichever is shorter.
5 33 4. INITIAL NOTIFICATION.
5 34 a. If an insurer writing personal insurance uses credit
5 35 information in underwriting or rating a consumer, the insurer
6 1 or the insurer's agent shall disclose, either on the insurance
6 2 application or at the time that the insurance application is
6 3 taken that the insurer may obtain credit information of the
6 4 consumer in connection with the application. Such disclosure
6 5 to a consumer shall either be written or provided in the same
6 6 medium as the application for insurance. An insurer is not
6 7 required to provide the disclosure statement required under
6 8 this subsection to a consumer in connection with the renewal
6 9 of a personal insurance policy if the consumer has previously
6 10 been provided with such a disclosure statement.
6 11 b. An insurer that uses the following statement of
6 12 disclosure shall be deemed to be in compliance with this
6 13 subsection:
6 14 "In connection with this application for insurance, we may
6 15 review your credit report or obtain or use a credit-based
6 16 insurance score based on the information contained in that
6 17 credit report. We may use a third party in connection with
6 18 the development of your insurance score."
6 19 5. NOTIFICATION OF ADVERSE ACTION. If an insurer takes
6 20 adverse action against a consumer based on credit information,
6 21 the insurer shall do all of the following:
6 22 a. Provide notification to the consumer that adverse
6 23 action has been taken, in accordance with the requirements of
6 24 the federal Fair Credit Reporting Act, 15 U.S.C. } 1681m(a).
6 25 b. Provide notification to the consumer explaining the
6 26 reasons for the adverse action taken. Such notice shall give
6 27 reasons for the adverse action taken in language that is
6 28 sufficiently clear and specific so that a person can identify
6 29 the basis for the insurer's decision to take adverse action.
6 30 Such notification shall include a description of up to four
6 31 factors that were the primary influences for the adverse
6 32 action taken. The use of generalized terms such as "poor
6 33 credit history", "poor credit rating", or "poor insurance
6 34 score" does not meet the explanation requirements of this
6 35 paragraph. Standardized credit explanations that are provided
7 1 by consumer reporting agencies or other third-party vendors
7 2 are deemed to comply with this paragraph.
7 3 6. INFORMATION FILED WITH THE COMMISSIONER OF INSURANCE.
7 4 a. An insurer that uses insurance scores to underwrite and
7 5 rate risks for personal insurance shall file the insurer's
7 6 scoring models or other scoring processes with the
7 7 commissioner of insurance. A third party may file scoring
7 8 models on behalf of an insurer. Information filed with the
7 9 commissioner that includes insurance scoring models may
7 10 include information including loss experience that justifies
7 11 the insurer's use of credit information.
7 12 b. Information filed with the commissioner of insurance
7 13 pursuant to this subsection shall be considered a confidential
7 14 record and be recognized and protected as a trade secret
7 15 pursuant to section 22.7, subsection 3.
7 16 7. INDEMNIFICATION. An insurer shall indemnify, defend,
7 17 and hold harmless agents or producers of the insurer from and
7 18 against all liability, fees, and costs, arising out of or
7 19 relating to the actions, errors, or omissions of an agent or
7 20 producer who obtains or uses credit information or insurance
7 21 scores on behalf of an insurer, provided that the agent or
7 22 producer follows the instructions or procedures established by
7 23 the insurer and complies with any applicable law or
7 24 regulation. This subsection shall not be construed to provide
7 25 a consumer or other insured with a cause of action that does
7 26 not exist in the absence of this subsection.
7 27 8. CONSUMER REPORTING AGENCY – SALE OF CREDIT
7 28 INFORMATION.
7 29 a. A consumer reporting agency shall not provide or sell
7 30 data or lists that include any information that was submitted,
7 31 in whole or in part, in conjunction with an insurance inquiry
7 32 about a consumer's credit information or a request for a
7 33 credit report or insurance score. Such information includes,
7 34 but is not limited to, the expiration dates of an insurance
7 35 policy or any other information that can be used to identify
8 1 the expiration date of a consumer's insurance policy or the
8 2 terms and conditions of the consumer's insurance coverage.
8 3 b. This subsection does not apply to the provision of
8 4 information, including data or lists, by a consumer reporting
8 5 agency to the agent or producer from whom the information was
8 6 received, to the insurer on whose behalf the agent or producer
8 7 acted, or to the insurer's affiliates or holding companies.
8 8 c. This subsection shall not be construed to restrict an
8 9 insurer from obtaining a claims history report or a motor
8 10 vehicle report of a consumer.
8 11 9. SEVERABILITY. If any subsection, paragraph, sentence,
8 12 clause, phrase, or any other part of this section is declared
8 13 invalid due to an interpretation of or a future change in the
8 14 federal Fair Credit Reporting Act, the remaining subsections,
8 15 paragraphs, sentences, clauses, phrases, or parts thereof
8 16 shall be in no manner affected thereby but shall remain in
8 17 full force and effect.
8 18 10. APPLICABILITY DATE. This section applies to personal
8 19 insurance contracts or policies delivered, issued for
8 20 delivery, continued, or renewed in this state on or after
8 21 April 1, 2005.
8 22
8 23
8 24
8 25 JEFFREY M. LAMBERTI
8 26 President of the Senate
8 27
8 28
8 29
8 30 CHRISTOPHER C. RANTS
8 31 Speaker of the House
8 32
8 33 I hereby certify that this bill originated in the Senate and
8 34 is known as Senate File 2257, Eightieth General Assembly.
8 35
9 1
9 2
9 3 MICHAEL E. MARSHALL
9 4 Secretary of the Senate
9 5 Approved , 2004
9 6
9 7
9 8
9 9 THOMAS J. VILSACK
9 10 Governor
Text: SF02256 Text: SF02258 Text: SF02200 - SF02299 Text: SF Index Bills and Amendments: General Index Bill History: General Index
© 2004 Cornell College and League of Women Voters of Iowa
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