Citations Affected: IC 27-2; IC 27-4.
Synopsis: Insurer use of credit information. Imposes certain
requirements and restrictions concerning the use of credit information
in the underwriting of property and casualty insurance. Excludes
commercial lines of insurance from the requirements and restrictions.
Makes a violation of the requirements and restrictions an unfair and
deceptive act and practice in the business of insurance.
Effective: July 1, 2002.
January 10, 2002, read first time and referred to Committee on Insurance and Financial
January 22, 2002, amended, reported favorably _ Do Pass.
February 1, 2002, read second time, amended, ordered engrossed.
A BILL FOR AN ACT to amend the Indiana Code concerning
SECTION 1. IC 27-2-21 IS ADDED TO THE INDIANA CODE AS
A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY
Chapter 21. Credit Information in Property and Casualty Insurance
Sec. 1. As used in this chapter, "applicant" means an individual who applies for a policy of property and casualty insurance.
Sec. 2. As used in this chapter, "commissioner" refers to the commissioner of the department.
Sec. 3. As used in this chapter, "credit information" means credit related information obtained through a review of a credit history, credit report, or credit score, or on an application for a policy of property and casualty insurance.
Sec. 4. As used in this chapter, "credit score" means a number or rating derived through a credit scoring methodology.
Sec. 5. As used in this chapter, "credit scoring methodology" means the particular algorithm, computer model, or other method
used by an insurer to reduce to a numerical rating for use in the
insurance underwriting process certain credit history data
contained in an individual's credit report.
Sec. 6. As used in this chapter, "department" refers to the department of insurance created under IC 27-1-1-1.
Sec. 7. As used in this chapter, "insured" means an individual who is entitled to coverage under a policy of property and casualty insurance.
Sec. 8. As used in this chapter, "insurer" means a person that:
(1) is described in IC 27-1-2-3(x); and
(2) issues a policy of property and casualty insurance.
Sec. 9. As used in this chapter, "property and casualty insurance" means one (1) or more of the kinds of insurance described in Class 2 and Class 3 of IC 27-1-5-1.
Sec. 10. (a) This chapter applies to an individual policy of property and casualty insurance.
(b) This chapter does not apply to a commercial line of insurance.
Sec. 11. (a) An insurer may not, based solely on credit information, refuse to issue, refuse to renew, or cancel a policy of property and casualty insurance.
(b) An insurer does not violate subsection (a) if the insurer offers to provide continuous coverage to an insured under a policy of property and casualty insurance underwritten:
(1) by an affiliate; or
(2) in a different rating class;
of the insurer.
Sec. 12. If the score of an insured or applicant is adversely impacted or cannot be generated because the credit history of the insured or applicant is insufficient, an insurer shall:
(1) use actuarially justified credit related underwriting or rating criteria that have been filed with the commissioner;
(2) apply underwriting or rating criteria to the insured or applicant as if the insured or applicant had a neutral credit history, as defined in the insurer's underwriting guidelines or rate making standards, unless otherwise actuarially justified; or
(3) exclude the use of credit as a factor in the underwriting or rating process.
Sec. 13. (a) If credit information is used in addition to other criteria as a basis for a refusal to issue, refusal to renew, cancellation or rating of a policy of property and casualty
insurance, the insurer shall provide notice to the insured or
applicant of its use as a basis for the refusal to issue, refusal to
renew, cancellation or rating of the policy of property and casualty
insurance, according to the provisions of the federal Fair Credit
Reporting Act (15 U.S.C. 1681 et seq.).
(b) An insured or applicant may, not more than ninety (90) days after the insured or applicant receives the notice required under subsection (a), request in writing from the insurer an explanation of the most significant reasons for the credit score result including the principal factors involved in the refusal to issue, refusal to renew, cancellation or rating of the policy of property and casualty insurance.
(c) Not more than twenty-one (21) business days after an insurer receives a request under subsection (b):
(1) the insurer; or
(2) a third party that:
(A) possesses the information necessary to provide an explanation requested under subsection (b); and
(B) is directed by the insurer to provide the requested explanation;
shall provide in writing to the insured or applicant the requested explanation.
(d) If an insurer, in the notice provided under subsection (a), provided the explanation of the principal factors requested under subsection (b), the insurer has met the requirement of subsection (c).
Sec. 14. (a) The commissioner may request from an insurer that uses a credit score:
(1) information that supports the insurer's use of a credit score; and
(2) the insurer's credit scoring methodology.
(b) The commissioner may request from an insurer that uses credit information other than a credit score to provide to the commissioner information that supports the insurer's use of the credit information.
(c) An insurer shall make information requested by the commissioner under this section available for examination by the department at the office of the insurer.
(d) Information provided by an insurer under this section is confidential.
Sec. 15. (a) An insurer shall not use credit information as a pretext for discrimination against an insured or applicant that is
based on the gender, race, nationality, or religion of the insured or
(b) A credit scoring methodology may not be used by an insurer if the credit scoring methodology incorporates the gender, race, nationality, or religion of an insured or applicant.
Sec. 16. A willful violation of this chapter is an unfair and deceptive act and practice in the business of insurance under IC 27-4-1-4, as determined by the commissioner.
Sec. 17. An insurance producer licensed under IC 27-1-15.6 is not liable in any action arising from the use of a credit score by an insurer, provided that the insurance producer complies with the insurer's procedures provided to the producer by the insurer concerning the use of credit scores.
Sec. 18. This chapter is not intended to conflict with any disclosure provisions of state law or the federal Truth in Lending Act (15 U.S.C. 1601 et seq.).
SECTION 2. IC 27-4-1-4, AS AMENDED BY P.L.132-2001, SECTION 8, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 4. The following are hereby defined as unfair methods of competition and unfair and deceptive acts and practices in the business of insurance:
(1) Making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, or statement:
(A) misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon;
(B) making any false or misleading statement as to the dividends or share of surplus previously paid on similar policies;
(C) making any misleading representation or any misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates;
(D) using any name or title of any policy or class of policies misrepresenting the true nature thereof; or
(E) making any misrepresentation to any policyholder insured in any company for the purpose of inducing or tending to induce such policyholder to lapse, forfeit, or surrender his insurance.
(2) Making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public,
in a newspaper, magazine, or other publication, or in the form of
a notice, circular, pamphlet, letter, or poster, or over any radio or
television station, or in any other way, an advertisement,
announcement, or statement containing any assertion,
representation, or statement with respect to any person in the
conduct of his insurance business, which is untrue, deceptive, or
(3) Making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting, or encouraging the making, publishing, disseminating, or circulating of any oral or written statement or any pamphlet, circular, article, or literature which is false, or maliciously critical of or derogatory to the financial condition of an insurer, and which is calculated to injure any person engaged in the business of insurance.
(4) Entering into any agreement to commit, or individually or by a concerted action committing any act of boycott, coercion, or intimidation resulting or tending to result in unreasonable restraint of, or a monopoly in, the business of insurance.
(5) Filing with any supervisory or other public official, or making, publishing, disseminating, circulating, or delivering to any person, or placing before the public, or causing directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of financial condition of an insurer with intent to deceive. Making any false entry in any book, report, or statement of any insurer with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public official to which such insurer is required by law to report, or which has authority by law to examine into its condition or into any of its affairs, or, with like intent, willfully omitting to make a true entry of any material fact pertaining to the business of such insurer in any book, report, or statement of such insurer.
(6) Issuing or delivering or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insurance.
(7) Making or permitting any of the following:
(A) Unfair discrimination between individuals of the same class and equal expectation of life in the rates or assessments charged for any contract of life insurance or of life annuity or
in the dividends or other benefits payable thereon, or in any
other of the terms and conditions of such contract; however, in
determining the class, consideration may be given to the
nature of the risk, plan of insurance, the actual or expected
expense of conducting the business, or any other relevant
(B) Unfair discrimination between individuals of the same class involving essentially the same hazards in the amount of premium, policy fees, assessments, or rates charged or made for any policy or contract of accident or health insurance or in the benefits payable thereunder, or in any of the terms or conditions of such contract, or in any other manner whatever; however, in determining the class, consideration may be given to the nature of the risk, the plan of insurance, the actual or expected expense of conducting the business, or any other relevant factor.
(C) Excessive or inadequate charges for premiums, policy fees, assessments, or rates, or making or permitting any unfair discrimination between persons of the same class involving essentially the same hazards, in the amount of premiums, policy fees, assessments, or rates charged or made for:
(i) policies or contracts of reinsurance or joint reinsurance, or abstract and title insurance;
(ii) policies or contracts of insurance against loss or damage to aircraft, or against liability arising out of the ownership, maintenance, or use of any aircraft, or of vessels or craft, their cargoes, marine builders' risks, marine protection and indemnity, or other risks commonly insured under marine, as distinguished from inland marine, insurance; or
(iii) policies or contracts of any other kind or kinds of insurance whatsoever.
However, nothing contained in clause (C) shall be construed to apply to any of the kinds of insurance referred to in clauses (A) and (B) nor to reinsurance in relation to such kinds of insurance. Nothing in clause (A), (B), or (C) shall be construed as making or permitting any excessive, inadequate, or unfairly discriminatory charge or rate or any charge or rate determined by the department or commissioner to meet the requirements of any other insurance rate regulatory law of this state.
(8) Except as otherwise expressly provided by law, knowingly permitting or offering to make or making any contract or policy of insurance of any kind or kinds whatsoever, including but not in
limitation, life annuities, or agreement as to such contract or
policy other than as plainly expressed in such contract or policy
issued thereon, or paying or allowing, or giving or offering to pay,
allow, or give, directly or indirectly, as inducement to such
insurance, or annuity, any rebate of premiums payable on the
contract, or any special favor or advantage in the dividends,
savings, or other benefits thereon, or any valuable consideration
or inducement whatever not specified in the contract or policy; or
giving, or selling, or purchasing or offering to give, sell, or
purchase as inducement to such insurance or annuity or in
connection therewith, any stocks, bonds, or other securities of any
insurance company or other corporation, association, limited
liability company, or partnership, or any dividends, savings, or
profits accrued thereon, or anything of value whatsoever not
specified in the contract. Nothing in this subdivision and
subdivision (7) shall be construed as including within the
definition of discrimination or rebates any of the following
(A) Paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance, so long as any such bonuses or abatement of premiums are fair and equitable to policyholders and for the best interests of the company and its policyholders.
(B) In the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount which fairly represents the saving in collection expense.
(C) Readjustment of the rate of premium for a group insurance policy based on the loss or expense experience thereunder, at the end of the first year or of any subsequent year of insurance thereunder, which may be made retroactive only for such policy year.
(D) Paying by an insurer or agent thereof duly licensed as such under the laws of this state of money, commission, or brokerage, or giving or allowing by an insurer or such licensed agent thereof anything of value, for or on account of the solicitation or negotiation of policies or other contracts of any kind or kinds, to a broker, agent, or solicitor duly licensed under the laws of this state, but such broker, agent, or solicitor receiving such consideration shall not pay, give, or allow credit for such consideration as received in whole or in part,
directly or indirectly, to the insured by way of rebate.
(9) Requiring, as a condition precedent to loaning money upon the security of a mortgage upon real property, that the owner of the property to whom the money is to be loaned negotiate any policy of insurance covering such real property through a particular insurance agent or broker or brokers. However, this subdivision shall not prevent the exercise by any lender of its or his right to approve or disapprove of the insurance company selected by the borrower to underwrite the insurance.
(10) Entering into any contract, combination in the form of a trust or otherwise, or conspiracy in restraint of commerce in the business of insurance.
(11) Monopolizing or attempting to monopolize or combining or conspiring with any other person or persons to monopolize any part of commerce in the business of insurance. However, participation as a member, director, or officer in the activities of any nonprofit organization of agents or other workers in the insurance business shall not be interpreted, in itself, to constitute a combination in restraint of trade or as combining to create a monopoly as provided in this subdivision and subdivision (10). The enumeration in this chapter of specific unfair methods of competition and unfair or deceptive acts and practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the commissioner or department or of any court of review under section 8 of this chapter.
(12) Requiring as a condition precedent to the sale of real or personal property under any contract of sale, conditional sales contract, or other similar instrument or upon the security of a chattel mortgage, that the buyer of such property negotiate any policy of insurance covering such property through a particular insurance company, agent, or broker or brokers. However, this subdivision shall not prevent the exercise by any seller of such property or the one making a loan thereon, of his, her, or its right to approve or disapprove of the insurance company selected by the buyer to underwrite the insurance.
(13) Issuing, offering, or participating in a plan to issue or offer, any policy or certificate of insurance of any kind or character as an inducement to the purchase of any property, real, personal, or mixed, or services of any kind, where a charge to the insured is not made for and on account of such policy or certificate of insurance. However, this subdivision shall not apply to any of the following:
(18) Using a policy form or rider that would permit a cancellation of coverage as described in subdivision (17).
(19) Violating IC 27-1-22-25 or IC 27-1-22-26 concerning motor vehicle insurance rates.
(20) Violating IC 27-8-21-2 concerning advertisements referring to interest rate guarantees.
(21) Violating IC 27-8-24.3 concerning insurance and health plan coverage for victims of abuse.
(22) Violating IC 27-8-26 concerning genetic screening or testing.
(23) Violating IC 27-1-15.6-3(b) concerning licensure of insurance producers.
(24) Violating IC 27-2-21 concerning discrimination in underwriting of property and casualty insurance.