Washington insurance commissioner adopts credit scoring ban

Feb 2, 2022, 12:33 PM | Updated: 12:59 pm

insurance rates...

The Thurston County Superior Court ruled against the Washington State Insurance Commissioner’s emergency order to ban the use of credit histories when determining private insurance rates. (Photo by Matt Cardy/Getty Images)

(Photo by Matt Cardy/Getty Images)

OLYMPIA, Wash. (AP) — Washington state Insurance Commissioner Mike Kreidler has adopted a rule prohibiting insurers from using credit scoring to set rates for auto, homeowner, and renter insurance for three years after the end of pandemic-related federal and state emergency financial protections, whichever is longer.

The rule was announced Tuesday and takes effect March 4. Kreidler’s office said it started the process of implementing a permanent rule after an emergency rule the commissioner issued last year was struck down by a court. The court found there was no justification to bypass normal rulemaking procedures.

Kreidler said he’s also proposing a new rule that would require insurers to provide policyholders with a written explanation for any premium change.

“We know that now, more than ever, credit reporting is unreliable,” Kreidler, a Democrat, had said in a written statement. “It is unfair to base how much someone pays for frequently mandatory insurance on an unreliable and fluctuating factor like a credit score.”

Kreidler said that once federal pandemic protections end, people who have struggled financially over the past two years are at risk of have delinquencies show up on their credit reports.

He noted that insurers charge good drivers with low credit scores nearly 80% more for mandatory auto insurance.

Republicans decried the move, saying that it will add costs to people on fixed incomes, like the elderly, who have benefited from reduced insurance rates because of their good credit scores.

“They’re now being placed in an untenable position where they aren’t getting more income and they’re seeing increase in rates of hundreds of dollars,” Republican Sen. John Braun said.

Two other states don’t allow credit scoring for both homeowners and auto insurance rates: California, which passed a ballot measure in 1988, and Massachusetts. Maryland allows credit scoring to determine rates on auto insurance, but not homeowners, and Hawaii allows credit scoring for homeowner’s insurance but not auto.

Kreidler said that he plans to use the time while the ban is in effect to work with the Legislature, consumer groups and the insurance industry in an effort to permanently end the use of credit scoring in setting insurance premiums.

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