Insurers banned from using your credit score to set rates for car, home insurance under temporary Washington order


OLYMPIA — Washington Insurance Commissioner Mike Kreidler Tuesday issued a temporary emergency order banning insurers from using credit scores to set rates for personal property insurance amid the COVID-19 pandemic.

The emergency order, which was filed this week, will take effect June 20, but Kreidler is working to turn it into a three-year prohibition to help consumers as they recover from the pandemic and restrictions that have left people unemployed.

The new rule requires insurers to file amended plans for impacted policies to Kreidler’s office by May 6. Then, the ban kicks in on all new policies or policy renewals processed on June 20 or later.

“We’re trying to protect consumers here in the face of what the insurance companies use right now,” Kreidler said in an interview. “Which is making a judgment call that if you have a low credit score, you obviously are making bad personal choices.

“A lot of people aren’t making personal choices out of a desire to do so,” he added. “They’re doing so because they’re pushed into the corner financially.”

The order applies to personal insurance on private automobiles, as well as renter and homeowner’s coverage, according to the rule, and prohibits insurers from using credit history to determine premiums, rates or eligibility for personal insurance coverage. The ban kicks in on all new policies or policy renewals processed on June 20 or later.

Tuesday’s order is the latest salvo by Kreidler, a Democrat and longtime critic of credit scores, as he seeks to end the practice in Washington. An organization opposing the order on Tuesday called it an end-run around the Legislature, where a similar proposal requested by Kreidler stalled this year.

Senate Bill 5010, sponsored by Sen. Mona Das, D-Kent — and requested by Kreidler and Gov. Jay Inslee — to end the use of credit scores for personal insurance stalled this year after being watered down through an amendment. The proposal was one of a slate of proposals introduced in this year’s session intended to improve equity across government and society.

Kenton Brine, president of the NW Insurance Council, a nonprofit industry organization, called Kreidler’s emergency order an effort to “circumvent the legislative process and unilaterally impose rules …”

Brine described credit scores as tools that “have proven time and time again” and which “more often than not save consumers money.”

House GOP Minority Leader J.T. Wilcox of Yelm on Tuesday said he hadn’t yet read the specifics of the order, but he criticized the use of another emergency order more than a year into the pandemic.

“And I think responsible members of the Legislature and the public should be deeply concerned about the way emergency rules by various elected officials have become normalized,” said Wilcox in a regularly scheduled news conference. “That’s not the way people in Washington expect their government be conducted.”

The order, however, drew cheers from Consumer Reports.

“Basing insurance rates on credit scores magnifies the negative impact of income disparities and systemic racism in our society,” said Chuck Bell, programs director for advocacy for Consumer Reports, in a statement. “Today’s action will ensure that insurance is priced fairly in Washington and help everyone afford the coverage they need. We hope the state legislature will take action before this order expires to make the ban on credit scores permanent.”

Most states allow insurers to use what is known as a credit-based insurance score to figure out, in part, homeowners insurance premiums.

Brine said it’s too early to know whether the insurance industry might challenge the order in the courts.

“I would certainly anticipate that they would” file a lawsuit, said Kreidler.



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