Washington State Insurance Commissioner Adopts Rule Banning Credit Scores

Mike Kreidler, Washington's Insurance Commissioner, has issued a temporary rule prohibiting insurers from using credit information to set auto, homeowner, and renters insurance rates.

Source: Digital Insurance | Published on February 4, 2022

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Kreidler issued an emergency rule in March 2021 to temporarily prohibit the use of credit scores, but it was overturned by a court last year. The new rule takes effect on March 4.

"I'm taking this action against insurers' use of credit scoring in response to the economic harm many people have suffered as a result of the COVID-19 pandemic—harm that has significantly impacted people who are already financially vulnerable," Kreidler said in a statement. "We know that credit reporting is untrustworthy now more than ever." It is unjust to base the cost of frequently required insurance on an unreliable and fluctuating factor such as a credit score."

Kreidler also proposed a new transparency rule that would require insurers to provide policyholders with a written explanation for any premium increases.

"If an insurer wants to change the amount you pay for coverage, you have the right to know why," Kreidler said. "And it shouldn't be difficult to comprehend the reasons for the change." If your insurance company wants your business, you deserve an honest and straightforward response. We're going to assist them in providing you with one by enforcing this rule."

The ban is intended to prevent discriminatory auto, renter, and homeowner pricing for the next three years, or until the federal and state emergency declarations expire, whichever comes first.

On February 3, the American Property Casualty Insurance Association and several insurance agent groups filed a lawsuit to overturn the ban.

"Insurance agents, brokers, and companies once again stand united in strongly opposing the unilateral action taken by Washington Insurance Commissioner Mike Kreidler," said Claire Howard, APCIA senior vice president, general counsel, and corporate secretary, in a statement. The Commissioner's extreme action goes beyond his authority, circumvents the legislature, and deprives consumers of the benefits of a highly competitive private market."