Bill on Insurer Use of Credit Passes Illinois Legislature

A bill that clarifies insurers’ use of consumer credit reports in underwriting has passed the Illinois General Assembly and is expected to be signed by the Governor. The American Insurance Association (AIA) worked closely with the industry to educate members of the legislature on how a consumer’s financial history is used by insurers.

“A consumer’s credit history is an accurate predictor of future losses,” said Deirdre K. Manna, AIA assistant vice president, midwest region. “The bill as it was introduced would have seriously hindered insurers’ ability to use this accurate, cost-effective underwriting tool.”

The bill, HB 2419, allows insurers to consider a consumer’s credit history when making underwriting or renewal decisions on a policy, but restricts its use as the sole basis for those decisions. Throughout the legislative process, AIA and its industry partners worked successfully to remove components of the bill restricting the use of credit on commercial policies as well as onerous reporting guidelines that would have increased costs while causing confusion for agents and consumers alike.

“Credit scoring is a complicated issue, and we understand the need to ensure that it is used fairly,” Manna said. “We look forward to working with our industry partners to continue the process of educating agents and consumers about this effective underwriting tool.”

Over the past several weeks, AIA, along with other insurance trade groups, sponsored several educational panels for Illinois agents on the use of credit in underwriting. This summer, the industry will produce informational brochures on the issue for consumers and agents.