HB5536 amends Illinois' Use of Credit Information in Personal Insurance Act by adding claims information as a regulated data category and by limiting how insurers may use that data in underwriting and pricing personal insurance. The bill defines "claims information" broadly and prohibits insurers from considering claims that stem from negligent or intentional actions by a third party or claims determined not to be covered by the consumer's policy.
It preserves an exception allowing consideration of claims that produced nonpayment due to the consumer's fraud.
Beyond the new claims‑data limits, the bill keeps and clarifies several existing credit‑information controls: insurers must use recent credit reports or scores (within 90 days) when taking adverse actions, cannot base actions solely on credit information, and must follow specified treatments where credit information is missing. For insurers, vendors, and regulators, HB5536 changes what data can feed pricing models and creates new compliance, documentation, and actuarial‑justification tasks.
At a Glance
What It Does
The bill inserts a definition of "claims information" into the state's Use of Credit Information Act and prohibits insurers from using certain types of claims when underwriting or rating personal insurance. It leaves intact and refines the statute's existing limits on how credit information and insurance scores may be used.
Who It Affects
All insurers authorized to sell personal lines in Illinois, consumer reporting agencies and third‑party claims databases, agents who handle underwriting disputes, and Illinois consumers whose claims or credit records are used in pricing decisions.
Why It Matters
HB5536 changes the pool of permissible underwriting inputs by excluding some claims data that insurers currently use to predict loss. That affects actuarial models, vendor contracts, data‑matching workflows, and regulatory filings — and it raises operational questions about identifying which claims are covered, third‑party caused, or fraudulent.
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What This Bill Actually Does
HB5536 expands the existing statute that governs insurer use of credit information by expressly adding "claims information" as a distinct data category. The bill defines claims information as any form of communication that allows an insurer to access information associated with claims made by a consumer.
Once defined, the statute places bright‑line limits on the use of that material when underwriting or pricing personal insurance.
Specifically, the bill bars insurers from considering claims that resulted from a third party's negligent or intentional act and from considering claims later determined not to be covered under the consumer's policy. The only claims‑related exception preserved allows an insurer to consider claims that led to nonpayment because the consumer committed fraud.
That narrows the universe of claims events that can be used as negative predictors in scoring or tier placement.HB5536 retains and clarifies the statute's parallel controls over credit information. Insurers still may not base adverse actions solely on credit data, must use credit reports or scores no older than 90 days when taking adverse action, and must provide notice plus an opportunity for the consumer to explain if a decision rests on credit information.
The bill also maintains rules on how inquiries, medical collections, and clustered lender inquiries are treated in scoring.Operationally, the bill creates several compliance hooks. Insurers must identify when a claim was third‑party caused or ruled not covered, exclude certain claim signals from scoring, update underwriting procedures, and document any actuarial justification when they choose to treat an absence of credit information in a particular way.
Vendors and consumer reporting agencies will likely need to change data feeds and flagging conventions so insurers can implement the statutory exclusions.
The Five Things You Need to Know
The bill defines "claims information" as any written, oral, or other communication that enables an insurer to access information associated with claims made by a consumer.
Insurers may not consider claims resulting from a third party's negligent or intentional act, nor claims determined not to be covered by the consumer’s policy, when underwriting or rating personal insurance.
The statute preserves a narrow exception: insurers may consider claims that resulted in a nonpayment because the consumer committed fraud.
When taking an adverse action based on credit information, an insurer must rely on a credit report or insurance score obtained or calculated within 90 days of initial writing or renewal.
The bill keeps several scoring exclusions and treatments: it bars using credit inquiries not initiated by the consumer, insurance‑identified inquiries, medical‑coded collection accounts, and treats multiple lender inquiries within 30 days for mortgage or auto as a single inquiry for scoring purposes.
Section-by-Section Breakdown
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Adds claims to the Act's focus and renames the statute
The Act's title and short title change to the Use of Credit and Claims Information in Personal Insurance Act, signaling that the legislature intends to regulate both credit and claims inputs. That relabeling matters procedurally: it makes claims information an explicit subject for future Department of Insurance guidance, filings, and enforcement actions under the same statutory framework that has governed credit use.
Defines 'claims information' and updates core terms
Section 15 inserts a broad definition of "claims information" and keeps the prior definitions for credit report, credit information, consumer reporting agency, and insurance score. The broad wording — "any written, oral, or other form of communication that enables an insurance company to access information associated with claims" — gives regulators and courts a wide interpretive field. Practically, insurers and vendors will need to agree on which data sources and flags qualify as claims information and how to map those elements to policyholder files.
Preserves credit safeguards and enumerates prohibited scoring inputs
Section 20(a) restates that insurers cannot rely solely on credit information to deny, cancel, nonrenew, or set renewal rates and requires notice and an opportunity to explain when credit drives an adverse decision. It also retains the 90‑day freshness requirement for credit reports used in adverse actions and details scoring exclusions: uninitiated credit inquiries, insurance‑marked inquiries, medical‑coded collections, and certain clustered mortgage/auto inquiries. Those enumerated exclusions directly constrain how scoring vendors construct inputs and how actuaries validate models for the Illinois market.
Annual re‑underwriting on request, with specified exceptions
Section 20(b) requires insurers that use credit information to re‑underwrite and re‑rate a policy at annual renewal upon an insured's or agent's request, subject to exceptions such as insurer treatment being otherwise approved by the Department, the insured already being in the most favorable tier, credit not having been used initially, or the insurer performing a non‑credit reevaluation at least every 36 months. The provision creates procedural requirements for handling requests and sets thresholds for when insurers can decline to recalculate based on operational or actuarial grounds.
Narrowed universe of claims signals insurers may use
Section 20(c) imposes affirmative prohibitions on considering particular classes of claims when underwriting or rating: claims attributable to third‑party negligence/intentional acts and claims found not covered under the consumer's policy. It also clarifies that claims leading to nonpayment due to consumer fraud remain admissible. From an implementation perspective, insurers must develop rules to classify claim causation and coverage determinations, and vendors will need new data flags so that models can exclude disallowed entries without undermining scoring logic.
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Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Consumers with third‑party or non‑covered claims — The bill prevents those claims from being treated as negative loss predictors, reducing the chance that a policyholder is penalized for events outside their control or for claims later found not covered.
- Policyholders with medical collection accounts — By explicitly barring the use of medical‑coded collection accounts as a negative factor, insureds struggling with medical debt avoid a common credit‑score penalty in insurance scoring.
- Consumers with sparse credit histories — The law requires insurers to follow one of three specified treatments where credit information is absent, which can prevent outright denial or opaque penalization when a consumer lacks a calculable insurance score.
Who Bears the Cost
- Insurers writing personal lines in Illinois — They must modify underwriting models, update scoring inputs, document exclusions, and possibly reprice products to reflect the narrower set of permissible claim signals.
- Claims data vendors and consumer reporting agencies — Vendors will need to change feeds, add flags (third‑party caused, non‑covered, fraud determinations), and support timely certification and recordkeeping for insurer audits.
- Actuarial and IT teams inside carriers — Firms must prepare actuarial justification for alternative treatments when credit is absent, implement the 90‑day freshness requirement operationally, and handle more frequent re‑underwriting requests or document exceptions.
- Department of Insurance — The Department may face higher administrative workload reviewing filings, certifications, and disputes about whether an insurer's treatment of missing credit information is actuarially justified.
Key Issues
The Core Tension
The bill balances two legitimate aims that pull in opposite directions: it protects consumers from being penalized for claims outside their control or for claims later found not covered, while constraining insurers' access to predictive claims signals that help them price risk accurately. That protection increases fairness for some policyholders but raises uncertainty and potential cost shifting for insurers, vendors, and other policyholders.
The bill's broad definition of "claims information" creates an implementation headache: carriers, vendors, and regulators will need precise conventions to identify which data sources, claim types, and flags fall inside the definition. Distinguishing a claim caused by a third party from an at‑fault claim often depends on carrier determinations, subrogation outcomes, or outside case law; those processes are themselves error‑prone and can lag long after a claim posts to a database.
Without detailed operational guidance, insurers will face either over‑exclusion (dropping predictive signals and raising prices) or inconsistent application that could drive litigation.
Another friction point is anti‑selection and pricing accuracy. Excluding third‑party and non‑covered claims from underwriting inputs reduces the amount of loss history available to predict future risk, which can blunt risk segmentation.
Insurers may respond by shifting weight to other predictive signals or by increasing rates generally to cover higher uncertainty, which could cause premium distributional effects not targeted by the statute. The statutory carve‑out for fraud mitigates moral hazard but leaves open disputes about what constitutes sufficient proof of fraud and how to operationalize nonpayment flags without producing false positives.
Finally, the actuarial‑justification route for treating missing credit information introduces opacity: carriers can certify certain treatments, but the public and examiners will rely on the Department to scrutinize those filings effectively to prevent gaming.
Practical compliance costs are real: vendors must add new data markers, IT systems must be adjusted for 90‑day windows and re‑underwriting workflows, and agents must get trained to submit insured requests and supporting explanations. Those costs may be disproportionately heavy for smaller carriers and niche writers, potentially altering market participation over time.
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