Washington Judge Rules Commissioner has No Authority to Ban Credit Scoring

In the past few months, Washington Insurance Commissioner Mike Kreidler tried to do away with the use of credit scoring as part of how insurers set insurance rates. And — again — Kreidler has been told by a court of law that he does not have the authority to enact such a ban.

On Friday of last week, Thurston County Judge Indu Thomas granted a Petition for a Declaratory Judgment to the Professional Independent Agents of Washington (PIA), the American Property Casualty Insurance Association (APCIA) and the Independent Insurance Agents and Brokers of Washington (IIABW).

Her decision invalidated Kreidler’s rule.

PIA Western Alliance Executive Vice President and CEO Clark Sitzes said the three groups found it to be good news that Kreidler’s ill-conceived rule has been overturned.

“The PIA applauds this decision, and millions of insurance consumers in Washington have reason to view this as a victory for them as well,” Sitzes said. “PIA members and their customers saw the damaging effects of the OIC’s (Office of the Insurance Commissioner’s) rules on the issue last year, with dramatically increased rates resulting from the OIC’s actions.”

In making her decision, Judge Thomas cited Washington State statutes that clearly show Kreidler overstepped his authority as insurance commissioner by ignoring the statutes that define what insurers can or cannot do.

Those statutes were set by the Washington Legislature and signed into law by a governor over 20 years ago.

Kreidler called the decision a setback for Washington’s consumers and said no decision has been made yet on how to proceed. However, a trip to the Legislature might be the direction he’ll head next.

“Today’s decision confirms that the best place to permanently address this issue is in the legislature. I hope legislators will listen to all policyholders impacted by this practice and not just the insurance industry,” Kreidler said in a news release last Friday.

Sitzes — and the other two associations — disagree that the Judge’s decision is going to hurt consumers. In fact, it does the reverse and helps them and has been shown to keep insurance rates down.

He also noted that the three insurance associations put their differences aside and took the commissioner to court because it was the right thing to do for their agent and company members and for the consumers of Washington State. 

“The PIA is proud to have joined with the American Property Casualty Insurer Association (APCIA) and the IIABW in the successful challenge to the OIC’s rules,” Sitzes concluded. “The PIA has been there from the beginning, starting with the successful challenge to the OIC’s emergency rules last year that the Thurston County Superior Court invalidated for being adopted ‘without good cause,’ to the successful challenge that led to Friday’s decision in Thurston County Superior Court.”

A joint news release issued by the three groups called this an “important victory for consumers as Insurance Commissioner Kreidler’s rule disrupted the insurance marketplace for consumers (especially for seniors) raising rates for more than a million Washington policyholders.”

In her opinion, Judge Thomas said the commissioner could not rely on the more general rating standard statute that prohibited “excessive, inadequate, or unfairly discriminatory” rates to “eliminate all meaning from the more specific credit history statutes by which the legislature had authorized its use.”

The joint news release also said, “We are pleased the court considered our legal arguments and agreed that the commissioner exceeded his authority when he put forth these regulations to ban the use of credit-based insurance scores for an indefinite time but for no less than three years. Judge Thomas agreed with our arguments that the issues presented a policy choice that is the province of the Legislature.”

Sitzes — and the PIA — agree.

“This is a matter that the Legislature has addressed,” Sitzes added. “The Court found that the OIC’s rules were inconsistent with the statutes that have been enacted by the legislature.”