Credit Score

WA banned from using credit scoring for pending insurance as lawsuit continues

A rule that would prohibit insurers in Washington state from considering a person’s credit score when setting rates will not go into effect this week, as planned, as the state and groups in the insurance industry have agreed to a pause while the courts consider the industry’s lawsuit stalled. Rule.

Washington Insurance Commissioner Mike Kreidler announced a temporary rule last month that would ban the use of credit scores when setting auto, home and renter’s insurance rates. Three insurance industry groups announced a lawsuit in Thurston County Superior Court two days later. The rule was due to come into effect on Friday.

“The parties have agreed to a temporary stay until the requested hearing takes place in May,” Kreidler spokeswoman Stephany Marquis said. She said the hearing was not yet scheduled.

Kreidler has sought for years to prohibit the use of credit ratings in rate setting, both legislatively and administratively. But the bills he has proposed have failed to gain traction in the state Legislature and this is the second time a court has stopped, or at least blocked, his ruling. prohibit the practice through the rule-making process.

Kreidler argued that credit scores are unreliable and an unfair way to determine rates for insurance that is, in many cases, mandatory. He argued that the practice is unfair to low-income people who often have lower credit scores, a situation that might say nothing about a person’s use of insurance.

“What does your credit information have to do with how you drive your car or maintain your property? Kreidler, a Democrat, wrote in 2020 as he urged the Legislature to act. “Shouldn’t your insurance premium be based on these factors or the number of claims you have filed and the cost of those claims?”

He said insurers often charge good drivers with bad credit scores 80% more for car insurance, and people with good credit and DWI convictions often pay less than those with bad credit. and a good driving record.

The insurance industry and Republicans argued that the rule change would lead to higher rates for people with good credit, including seniors and those on fixed incomes.

“We were here, in the middle of a pandemic, with thousands out of work, many businesses on life support, and working families struggling to put food on the table,” said Sen. Jeff Wilson, R-Longview, in a prepared statement. Thusday. “And Kreidler came along and decided he wanted to give people with bad credit a break on insurance, by raising insurance rates for everyone else.”

Wilson called on Kreidler to resign, after a Northwest News Network report that he verbally abused staff.

Kreidler said the rule is designed to be “rate neutral” for insurers, so any rate changes propagate to the entire policyholder group.

People with good credit could see a one-time rate increase, while those with bad credit would see a one-time rate drop, depending on how much their insurer relied on the credit score, said Kreidler’s office.

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

Information from The Associated Press is included in this report.