Senate File 2245 - Introduced
SENATE FILE
BY QUIRMBACH, COURTNEY, FRAISE,
SCHOENJAHN, DEARDEN, HORN,
SENG, DVORSKY, KREIMAN,
RAGAN, BOLKCOM, CONNOLLY,
STEWART, KIBBIE, BLACK, and
WOOD
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 5958XS 81
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PAG LIN
1 1 Section 1. Section 507B.4, Code 2005, is amended by adding
1 2 the following new subsection:
1 3 NEW SUBSECTION. 15. USE OF CREDIT INFORMATION. Any
1 4 violation of section 515.109A.
1 5 Sec. 2. Section 515.109A, subsections 1 and 2, Code
1 6 Supplement 2005, 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, term life insurance policies
2 24 issued pursuant to chapter 508, and accident and health
2 25 insurance policies issued pursuant to chapter 514A, that are
2 26 individually underwritten for personal, family, farm, or
2 27 household use. No other type of insurance is included as
2 28 personal insurance for the purposes of this section.
2 29 2. USE OF CREDIT INFORMATION == PROHIBITED. An insurer
2 30 authorized to do business in Iowa that uses shall not use
2 31 credit information to underwrite or rate risks for a policy of
2 32 personal insurance shall not do including but not limited to
2 33 doing any of the following:
2 34 a. Use Using an insurance score that is calculated using
2 35 income, gender, address, zip code, ethnic group, religion,
3 1 marital status, race, or nationality of a consumer as a
3 2 factor.
3 3 b. Deny Denying issuance, cancel canceling, or refuse
3 4 refusing to renew a policy of personal insurance solely based
3 5 on the basis any consideration of credit information, without
3 6 consideration of any other applicable underwriting factors
3 7 independent of credit information that are not otherwise
3 8 prohibited under paragraph "a".
3 9 c. Base Basing a consumer's renewal rates for personal
3 10 insurance solely on the basis any consideration of credit
3 11 information, without consideration of any other applicable
3 12 underwriting factors independent of credit information that
3 13 are not otherwise prohibited under paragraph "a".
3 14 d. Take Taking adverse action against a consumer solely
3 15 because based on any consideration of the fact that the
3 16 consumer does not have a credit card account, without
3 17 consideration of any other applicable underwriting factors
3 18 independent of credit information that are not otherwise
3 19 prohibited under paragraph "a".
3 20 e. Consider Considering an absence of credit information
3 21 or an inability to calculate an insurance score in
3 22 underwriting or rating personal insurance unless the insurer
3 23 does one of the following:
3 24 (1) Treats the consumer as if the consumer has neutral
3 25 credit information, as defined by the insurer.
3 26 (2) Excludes the use of credit information as an
3 27 underwriting factor and only uses other underwriting criteria.
3 28 f. Take Taking adverse action against a consumer based on
3 29 credit information, unless the insurer obtains and uses a
3 30 credit report issued or an insurance score calculated within
3 31 ninety days before the date a personal insurance policy is
3 32 first written or a renewal is issued.
3 33 g. Use credit information unless not later than every
3 34 thirty=six months following the last time that the insurer
3 35 obtained current credit information for the insured, the
4 1 insurer recalculates the insurance score or obtains an updated
4 2 credit report for the insured. Regardless of the requirements
4 3 of this paragraph:
4 4 (1) At annual renewal, upon the request of the consumer or
4 5 the consumer's agent, the insurer shall re=underwrite and re=
4 6 rate the personal insurance policy based upon a current credit
4 7 report or insurance score. An insurer is not required to
4 8 recalculate an insurance score or obtain a current credit
4 9 report more than once in a twelve=month period.
4 10 (2) The insurer shall have the discretion to obtain
4 11 current credit information for a consumer more frequently than
4 12 every thirty=six months, if consistent with the insurer's
4 13 underwriting guidelines.
4 14 (3) Notwithstanding subparagraph (1), an insurer is not
4 15 required to obtain current credit information for a consumer
4 16 if any of the following applies:
4 17 (a) The insurer is treating the consumer as otherwise
4 18 approved by the commissioner of insurance.
4 19 (b) The consumer is in the most favorably priced tier of
4 20 the insurer, within a group of affiliated insurers. However,
4 21 the insurer shall have the discretion to obtain current credit
4 22 information, if consistent with the insurer's underwriting
4 23 guidelines.
4 24 (c) Credit information was not used for underwriting or
4 25 rating the insured when the personal insurance policy was
4 26 initially written. However, the insurer shall have the
4 27 discretion to use current credit information for underwriting
4 28 or rating the insured upon renewal of the policy, if
4 29 consistent with the insurer's underwriting guidelines.
4 30 (d) The insurer reevaluates the insured beginning no later
4 31 than thirty=six months after the personal insurance policy was
4 32 initially written and thereafter, based on other underwriting
4 33 or rating factors, excluding credit information.
4 34 h. g. Use Using any of the following as a negative factor
4 35 in any insurance scoring methodology or in reviewing credit
5 1 information used for the purpose of underwriting or rating a
5 2 personal insurance policy:
5 3 (1) Credit inquiries not initiated by the consumer or
5 4 inquiries requested by the consumer for the consumer's own
5 5 credit information.
5 6 (2) Inquiries relating to insurance coverage, if so
5 7 identified on a consumer's credit report.
5 8 (3) Collection accounts with a medical industry code, if
5 9 so identified on a consumer's credit report.
5 10 (4) Multiple lender inquiries, if coded by a consumer
5 11 reporting agency on the consumer's credit report as being from
5 12 the home mortgage industry and made within thirty days of one
5 13 another, unless only one inquiry is considered.
5 14 (5) Multiple lender inquiries, if coded by a consumer
5 15 reporting agency on the consumer's credit report as being from
5 16 the automobile lending industry and made within thirty days of
5 17 one another, unless only one inquiry is considered.
5 18 Sec. 3. Section 515.109A, subsections 3 through 8, Code
5 19 Supplement 2005, are amended by striking the subsections.
5 20 Sec. 4. Section 515.109A, subsection 9, Code Supplement
5 21 2005, is amended by striking the subsection and inserting in
5 22 lieu thereof the following:
5 23 9. VIOLATIONS. A violation of this section is an unfair
5 24 insurance practice as provided in chapter 507B.
5 25 Sec. 5. Section 515.109A, subsection 10, Code Supplement
5 26 2005, is amended to read as follows:
5 27 10. APPLICABILITY DATE. This section applies to personal
5 28 insurance contracts or policies delivered, issued for
5 29 delivery, continued, or renewed in this state on or after
5 30 October 1, 2004 2006.
5 31 EXPLANATION
5 32 This bill amends Code section 515.109A to prohibit the use
5 33 of credit information by insurers for underwriting or rating
5 34 risks for personal insurance. The bill also changes the
5 35 definition of personal insurance to include term life
6 1 insurance policies issued under Code chapter 508, and accident
6 2 and health insurance policies issued under Code chapter 514A.
6 3 Currently, the use of credit information for such purposes is
6 4 allowed under certain circumstances and regulation of the use
6 5 of credit information does not apply to term life or accident
6 6 and health insurance policies.
6 7 Uses of credit information prohibited by the bill include
6 8 using an insurance score; denying issuance, canceling, or
6 9 refusing to renew a personal insurance policy based on any
6 10 consideration of credit information; basing a consumer's
6 11 insurance renewal rates on any consideration of credit
6 12 information; taking any adverse action against a consumer
6 13 based on any consideration of the fact that the consumer does
6 14 not have a credit card account; considering an absence of
6 15 credit information or an inability to calculate an insurance
6 16 score in underwriting or rating personal insurance; and taking
6 17 any adverse action against a consumer based on credit
6 18 information. For purposes of the bill, "adverse action" means
6 19 a denial of issuance, cancellation, or refusal to renew, an
6 20 increase in any charge for, or a reduction or other
6 21 unfavorable change in the terms of coverage or amount of any
6 22 personal insurance existing or applied for, or in connection
6 23 with, the underwriting of personal insurance.
6 24 The bill provides that a violation of Code section 515.109A
6 25 is an unfair insurance practice as provided in Code chapter
6 26 507B and the proceedings, orders, and penalties contained in
6 27 Code chapter 507B are applicable to violations of the bill.
6 28 The bill is applicable to personal insurance contracts or
6 29 policies delivered, issued for delivery, continued, or renewed
6 30 in this state on or after October 1, 2006.
6 31 LSB 5958XS 81
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