CHAPTER 88 HOUSE BILL No. 2071 An Act concerning insurance; relating to group health policies; relating to the use of credit
scores in issuing certain policies; amending K.S.A. 2002 Supp. 40-2258 and repealing
the existing section.
Be it enacted by the Legislature of the State of Kansas:

      Section  1. K.S.A. 2002 Supp. 40-2258 is hereby amended to read as
follows: 40-2258. (a) An accident and sickness insurer which offers cov-
erage through a group policy providing hospital, medical or surgical ex-
pense benefits pursuant to K.S.A. 40-2209 and amendments thereto
which includes mental health benefits shall be subject to the following
requirements:

      (1) If the policy does not include an aggregate lifetime limit on sub-
stantially all hospital, medical and surgical expense benefits, the policy
may not impose any aggregate lifetime limit on mental health benefits;

      (2) if the policy includes an aggregate lifetime limit on substantially
all hospital, medical and surgical expense benefits the plan shall either:
(A) Apply the applicable lifetime limit both to the hospital, medical and
surgical expense benefits to which it otherwise would apply and to mental
health benefits and not distinguished in the application of such limit be-
tween such hospital, medical and surgical expense benefits and mental
health benefits; or (B) not include any aggregate lifetime limit on mental
health benefits that is less than the applicable lifetime limit on hospital,
medical and surgical expense benefits;

      (3) if the policy does not include an annual limit on substantially all
hospital, medical and surgical expense benefits, the plan or coverage may
not impose any annual limit on mental health benefits; and

      (4) if the policy includes an annual limit on substantially all hospital,
medical and surgical expense benefits the policy shall either: (A) Apply
the applicable annual limit both to hospital, medical and surgical expense
benefits to which it otherwise would apply and to mental health benefits
and not distinguish in the application of such limit between such hospital,
medical and surgical expense benefits and mental health benefits; or (B)
not include any annual limit on mental health benefits that is less than
the applicable annual limit.

      (b) If the group policy providing hospital, medical or surgical expense
benefits is not otherwise covered by subsection (a) and either does not
apply a lifetime or annual benefit or applies different lifetime or annual
benefits to different categories of hospital, medical and surgical expense
benefits, the commissioner may adopt rules and regulations under which
subsections (a)(2) and (a)(4) are applied to such policies with respect to
mental health benefits by substituting for the applicable lifetime or annual
limits an average limit that is computed taking into account the weighted
average of the lifetime or annual limits applicable to such categories.

      (c) Nothing in this section shall be construed as either:

      (1) Requiring an accident and sickness policy to offer mental health
benefits except as otherwise required by K.S.A. 40-2,105 and amend-
ments thereto; or

      (2) affecting any terms and conditions of a policy which does include
mental health benefits including provisions regarding cost sharing, limits
on the number of visits or days of coverage, requirements relating to
medical necessity, requirements relating to the amount, duration or scope
of mental health benefits under the plan or coverage, except as specifically
provided in subsection (a).

      (d) This section shall not apply to any group accident and health in-
surance policy which is sold to a small employer as defined in K.S.A. 40-
2209 and amendments thereto.

      (e) This section shall not apply with respect to a group policy provid-
ing hospital, medical or surgical expense benefits if the application of this
section will result in an increase in the cost under the plan of at least 1%.

      (f) In the case of a group policy providing hospital, medical or surgical
expense benefits that offers an eligible employee, member or dependent
two or more benefit package options under the policy, subsections (a)
and (b) shall be applied separately with respect to each such option.

      (g) As used in this section:

      (1) ``Aggregate lifetime limit'' means, with respect to benefits under
a group policy providing hospital, medical or surgical expense benefits, a
dollar limitation on the total amount that may be paid with respect to
such benefits under the policy with respect to an eligible employee, mem-
ber or dependent;

      (2) ``annual limit'' means, with respect to benefits under a group pol-
icy providing hospital, medical or surgical expense benefits, a dollar lim-
itation on the total amount of benefits that may be paid with respect to
such benefits in a 12-month period under the policy with respect to an
eligible employee, member or dependent;

      (3) ``hospital, medical or surgical expense benefits'' means benefits
with respect to hospital, medical or surgical services, as defined under
the terms of the policy, but does not include mental health benefits;

      (4) ``mental health benefits'' means benefits with respect to mental
health services, as defined under the terms of the policy, but does not
include benefits with respect to treatment of substance abuse or chemical
dependency.

      (h) This section shall be effective for group policies providing hos-
pital, medical or surgical expense benefits which are entered into or re-
newed after January 1, 1998. This section shall not apply to benefits for
services furnished on or after December 31, 2002 2003.

      (i) The commissioner is hereby authorized to adopt such rules and
regulations as may be necessary to carry out the provisions of this section.

      New Sec.  2. Sections 2 through 15, and amendments thereto, shall
be known as the Kansas insurance score act.

      New Sec.  3. (a) This act shall apply only to personal insurance and
not to commercial insurance. A personal insurance policy must be indi-
vidually underwritten for personal, family or household use. No other
type of insurance shall be included as personal insurance for the purpose
of this act.

      (b) This act shall apply to all personal insurance policies either written
to be effective or renewed on or after January 1, 2004.

      New Sec.  4. As used in this act:

      (a) ``Adverse action'' means any of the following in connection with
the underwriting of personal insurance:

      (1) A denial or cancellation of coverage;

      (2) anything other than the best possible rate; or

      (3) a reduction or other adverse or unfavorable change in the terms
of coverage of any insurance regardless of whether such insurance is in
existence or has been applied for.

      (b) ``Affiliate'' means any company that controls, is controlled by, or
is under common control with another company.

      (c) ``Agent'' shall have the meaning ascribed to it in subsection (k) of
K.S.A. 2002 Supp. 40-4902, and amendments thereto, unless the context
requires otherwise.

      (d) ``Applicant'' means an individual who has applied to an insurer to
be covered by a personal insurance policy.

      (e) ``Commissioner'' means the commissioner of insurance and any
authorized designee of the commissioner.

      (f) ``Consumer'' means an insured whose credit information is used
or whose insurance score is calculated in the underwriting or rating of a
personal insurance policy. ``Consumer'' also includes an applicant for a
personal insurance policy.

      (g) ``Consumer reporting agency'' means any person which, for mon-
etary fees, dues, or on a cooperative nonprofit basis, regularly engages,
in whole or in part, in the practice of assembling or evaluating consumer
credit information or other information on consumers for the purpose of
furnishing consumer reports to third parties.

      (h) ``Credit information'' means any credit related information de-
rived from a credit report, found on a credit report itself, or provided on
an application for personal insurance. Credit information shall not include
any information which is not credit related, regardless of whether such
information is contained in a credit report or in an application or is used
to calculate an insurance score.

      (i) ``Credit report'' means any written, oral, or other communication
of information by a consumer reporting agency bearing on a consumer's
credit worthiness, credit standing or credit capacity which is used or ex-
pected to be used or collected in whole or in part for the purpose of
serving as a factor to determine personal insurance premiums, eligibility
for coverage, or tier placement.

      (j) ``Department'' means the insurance department established by
K.S.A. 40-102 and amendments thereto.

      (k) ``Insurance score'' means a number or rating that is derived from
an algorithm, computer application, model, or other process that is based,
in whole or in part, on credit information for the purposes of predicting
the future insurance loss exposure of an individual applicant or insured.

      (l) ``Personal insurance'' means private passenger automobile, hom-
eowners, motorcycle, mobile homeowners and non-commercial dwelling
fire insurance policies and boat, personal water craft, snowmobile and
recreational vehicle policies. For the strict purposes of this act, personal
insurance shall also include individually underwritten policies of far-
mowners.

      New Sec.  5. No insurer authorized to do business in the state of
Kansas which uses credit information to underwrite or rate risks, shall:

      (a) Use an insurance score that is calculated using income, address,
zip code, race, religion, color, sex, disability, national origin, ancestry or
marital status of the consumer as a factor.

      (b) Without consideration of any other applicable underwriting factor
independent of credit information and not expressly prohibited by sub-
section (a), refuse to quote, deny, cancel or refuse to renew any policy of
personal insurance solely on the basis of credit information.

      (c) Without consideration of any other applicable factor independent
of credit information, base an insured's renewal rates for personal insur-
ance solely upon credit information.

      (d) Without consideration of any other applicable factor independent
of credit information, take an adverse action against a consumer solely
because such consumer does not have a credit card account.

      (e) Consider an absence of credit information or an inability to cal-
culate an insurance score in underwriting or rating personal insurance,
unless the insurer does one of the following:

      (1) Treat the consumer as if the applicant or insured had neutral
credit information, as defined by the insurer; or

      (2) exclude the use of credit information as a factor and use only other
underwriting criteria.

      (f) Take an adverse action against a consumer based on credit infor-
mation, unless an insurer obtains and uses a credit report issued or an
insurance score calculated within 90 days from the date the personal
insurance policy is first written or notice of renewal is issued.

      (g)  (1) Except as provided in paragraphs (2) and (3), use credit in-
formation unless not later than every 36 months following the last time
that the insurer obtained current credit information for the insured, the
insurer recalculates the insurance score or obtains an updated credit re-
port.

      (2) The insurer shall:

      (A) Re-underwrite and re-rate the consumer's personal insurance
policy, at the annual renewal of such policy, based upon a current credit
report or insurance score for such consumer, if requested by the con-
sumer. Such consumer's current credit report or insurance score shall be
used if the result of the re-underwrite and re-rate reduces the consumer's
rate. Such consumer's current credit report or insurance score shall not
be used to increase the consumer's rate. The insurer shall not be found
to be in violation of rate filings by adjusting an insured's rate in accordance
with this subparagraph. Nothing in this subparagraph shall require an
insurer to recalculate a consumer's insurance score or obtain the updated
credit report of a consumer more frequently than once in a twelve-month
period.

      (B) Have the discretion to obtain current credit information upon
any renewal before the 36 months, if consistent with such insurer's un-
derwriting guidelines.

      (3) No insurer shall be required to obtain current credit information
for an insured, if:

      (A) The insured is in the most favorably-priced tier of the insurer,
within a group of affiliated insurers. However, the insurer shall have the
discretion to order such report, if consistent with such insurer's under-
writing guidelines;

      (B) credit was not used for underwriting or rating such insured when
the policy was initially written. However, the insurer shall have the dis-
cretion to use credit for underwriting or rating such insured upon re-
newal, if consistent with such insurer's underwriting guidelines; or

      (C) The insurer re-evaluates the insured beginning no later than 36
months after inception and thereafter based upon other underwriting or
rating factors, excluding credit information.

      (h) Use any of the following as a negative factor against a consumer
in any insurance scoring methodology or in reviewing credit information
for the purpose of underwriting or rating a policy of personal insurance:

      (1) Any credit inquiry not initiated by the consumer or any inquiry
requested by the consumer for such consumer's own credit information;

      (2) any inquiry relating to insurance coverage, if so identified on a
consumer's credit report;

      (3) any collection account with a medical industry code, if so identi-
fied on the consumer's credit report; or

      (4) any additional lender inquiry beyond the first such inquiry related
to the same loan purpose, if coded by the consumer reporting agency on
the consumer's credit report as being from the given loan industry and
made within 30 days of one another.

      New Sec.  6. (a) If it is determined through the dispute resolution
process set forth in the federal fair credit reporting act, 15 USC
1681i(a)(5), that the credit information of a current insured was incorrect
or incomplete and if the insurer receives notice of such determination
from either the consumer reporting agency or from the insured, the in-
surer shall re-underwrite and re-rate the consumer within 30 days of
receiving the notice. After re-underwriting or re-rating the insured, the
insurer shall make any adjustments necessary, consistent with such in-
surer's underwriting and rating guidelines.

      (b) If an insurer determines that the insured has overpaid the pre-
mium, the insurer shall refund to the insured the amount of overpayment
calculated back to the shorter of either the last 12 months of coverage or
the actual policy period.

      New Sec.  7. If an insurer writing personal insurance uses credit in-
formation in underwriting or rating a consumer, the insurer or its agent
shall disclose that it may obtain credit information in connection with
such application. The insurer shall further notify such consumer that an
internal appeal process exists as provided by paragraph (b) of section 8
and amendments thereto. The disclosure shall be made either on the
insurance application or at the time the insurance application is taken.
Such disclosure shall be either written or provided to an applicant in the
same medium as the application for insurance. The insurer need not
provide the disclosure statement required under this section to any in-
sured on a renewal policy if such consumer has previously been provided
a disclosure statement.

      New Sec.  8. (a) If an insurer takes an adverse action based upon
credit information, the insurer shall provide written notification to the
consumer a notice that:

      (1) An adverse action has been taken, in accordance with the require-
ments of the federal fair credit reporting act as set forth in, 15 USC
1681m(a); and

      (2) explains the reason for such adverse action.

      (b) Each reason must be provided in sufficiently clear and specific
language so that a person can identify the basis for the insurer's decision
to take such adverse action. An insurer shall provide a procedure whereby
a consumer may review an adverse action based on credit information.
Such procedure shall be consistent with the provisions of K.S.A. 40-2,112
and amendments thereto. The insurer and the insurer's agent shall be
immune from any action arising from information provided to the insured
through such process. The insurer shall not be found in violation of rate
filings by adjusting an insured's rate in such a manner.

      (c) The use of generalized terms such as ``poor credit history,'' ``poor
credit rating,'' or ``poor insurance score'' shall be deemed not to comply
with requirements of this section.

      New Sec.  9. (a) Each insurer that uses insurance scores to under-
write and rate risks shall file the procedure required by paragraph (b) of
section 8, and amendments thereto, and such insurer's insurance scoring
models or other insurance scoring processes with the insurance depart-
ment. A third party may file with the insurance department such third
party's scoring models or other scoring processes used on behalf of an
insurer. Any filing that includes insurance scoring may include loss ex-
perience justifying the use of credit information.

      (b) Except for the procedure required by paragraph (b) of section 8,
and amendments thereto, any filing relating to insurance scoring models
or other insurance scoring processes shall be considered to be a trade
secret and confidential under the open records act.

      New Sec.  10. (a) The commissioner of insurance shall gather data,
hold public hearings, make inquiries and publish studies relating to the
purpose of this act.

      (b) The commissioner shall report to the president and minority
leader of the senate and the speaker and minority leader of the house of
representatives by January 26, 2005, on issues relating to the use of credit
history in the underwriting and rating of personal insurance and the im-
plementation of this act.

      New Sec.  11. (a) An insurer shall indemnify, defend, and hold agents
harmless from and against all liability, fees, and costs arising out of or
relating to the actions, errors, or omissions of an agent who obtains or
uses credit information or insurance scores, or both, for an insurer.

      (b) The provisions of subsection (a) shall not be available whenever
the agent fails to:

      (1) Follow the instructions of or procedures established by the in-
surer; and

      (2) comply with any applicable law or regulation.

      (c) Nothing in this section shall be construed to provide a consumer
or other insured with a cause of action that does not exist in the absence
of this section.

      New Sec.  12. (a) No consumer reporting agency shall provide or sell
data or lists that include any information, in whole or in part, which was
submitted in conjunction with an insurance inquiry about a consumer's
credit information or a request for a credit report or insurance score.
Such information includes, but is not limited to:

      (1) The expiration date of an insurance policy or any other informa-
tion that may identify any time period during which a consumer's insur-
ance may expire; and

      (2) the terms and conditions of the consumer's insurance coverage.

      (b) The restrictions provided in subsection (a) of this section do not
apply to:

      (1) Any data or list the consumer reporting agency supplies to the
insurance agent from whom information was received;

      (2) the insurer for whom such agent acted; or

      (3) such insurer's affiliates or holding companies.

      (c) Nothing in this section shall be construed to prohibit or restrict
any insurer from obtaining a claims history report or a motor vehicle
report.

      New Sec.  13. Whenever an insurer is found to be in violation of any
provision of this act, the commissioner shall proceed under K.S.A. 40-
2,125 and amendments thereto.

      New Sec.  14. The commissioner of insurance is hereby authorized
to adopt such rules and regulations as may be necessary to carry out the
provisions of this act.

      New Sec.  15. (a) If any provision of this act is declared invalid due
to an interpretation of or a future change in the federal fair credit re-
porting act, the remaining portions of the act shall be deemed to be
severable and shall remain in full force and effect.

      (b) If any provision of this act or the application thereof to any person
or circumstance is held invalid, the invalidity does not affect other pro-
visions or applications of the act which can be given effect without the
invalid provision or application, and to this end the provisions of this act
are severable.

 Sec.  16. K.S.A. 2002 Supp. 40-2258 is hereby repealed.

 Sec.  17. This act shall take effect and be in force from and after its
publication in the statute book.

Approved April 16, 2003.
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