Washington Insurance Commissioner Mike Kreidler wants the Legislature to modify the state’s credit scoring laws for auto, homeowners and property, renters and life insurance. Under Kreidler’s proposal credit scores cannot be used to determine those rates.
However, he does want to continue to allow insurers to keep using other factors for rate setting. They would be age, gender, where a person lives, marital status and more.
“The use of credit scores in insurance is discriminatory and unjustly targets people of color, those with lower incomes and individuals and businesses struggling during the coronavirus pandemic,” Kreidler said in a news release. “The insurance industry claims that people with lower credit scores are more likely to file future insurance claims. I believe it’s inherently abhorrent, unfair and unjust. There’s plenty of information an insurer can use to determine your premium. They don’t need to use credit information to build up their profits.
Kreidler says people are going to feel the impact of the COVID-19 pandemic for years to come.
“They don’t need to be hit even harder by their insurance company,” he said. “It will be extremely hard for many people to improve their credit scores or even maintain their current score. They should not be penalized for circumstances that are no fault of their own.”
The commissioner has been pushing to do away with credit scoring — and without success — since 2001. While that hasn’t worked, he has gotten the Legislature to agree to limits. Insurers can’t use credit history to deny coverage or cancel a policy and some factors — like medical bankruptcy — cannot be used to determine an insurance rate.
In his news release Kreidler said he disagrees with the contention of insurers that we all benefit from the use of credit scoring.
“How insurers use your credit information is a big dark secret. Even I don’t get to see the data or how it’s weighed against other information they collect,” Kreidler’s statement said. “Insurers should not be able to use these economic times to their advantage. They have plenty of other information they can use to price fairly.”
Many in the insurance industry and several insurance groups aren’t buying Kreidler’s argument. PIA Western Alliance Executive Vice President Clark Sitzes said, “We oppose his move to once again do away with credit scoring. We know credit scoring is a very accurate underwriting tool.”
American Property Casualty Insurance Association (APCIA) vice president for state affairs Mark Sektnan said rather than wanting credit scores banned, Kreidler ought to be looking at the Credit-Based Insurance Scoring Model Act that was created by the National Council of Insurance Legislators (NCOIL).
It takes into account extraordinary life circumstances when considering credit and insurance premiums.
“The fairest way to determine what people pay for auto insurance is to use a variety of factors that provide insurers with a more complete picture of a consumer’s potential for filing a claim or having a loss. Credit-based insurance scores provide most consumers with savings,” Sektnan said. “The NCOIL model law can provide important additional consumer protections.”
Source links: Washington Department of Insurance