The Washington Insurance Commissioner is calling on other states to ban insurance companies from using credit scores to determine insurance rates, according to a news release.
Commissioner Mike Kreidler issued such a rule on an emergency basis in March to protect people financially impacted by the pandemic from facing higher insurance rates. However, Kreidler also has said he believes this practice unfairly disadvantages low-income consumers.
In a letter to the National Association of Insurance Commissioners, Kreidler urged his colleagues to join his effort.
“I encourage you to take similar action in your states,” Kreidler said in his letter. “It is indisputable that insurance credit scoring has become unfairly discriminatory.”
Currently, California, Hawaii, Maryland, Michigan and Massachusetts ban or limit insurance companies’ use of credit scores to rate policies, according to Kreidler’s office.
In response to Kreidler’s ban, the American Property Casualty Insurance Association requested a preliminary injunction to halt the temporary rule, but a Thurston County Superior Court judge denied that request on April 23.
Judge Mary Sue Wilson ruled Kreidler demonstrated good cause for the emergency rule and did not exceed his authority as the industry association contended.
Following the court ruling, Kreidler issued a statement calling the decision a victory for consumers.
“The decision essentially says the multi-billion-dollar industry and its associations are unlikely to prevail on their claims,” Kreidler said. “I knew I was justified in my authority to take action to protect consumers.”
Claire Howard, APCIA senior vice president general counsel and corporate secretary, expressed disappointment in the ruling in a news release, arguing the ban will likely raise insurance rates.
“While Commissioner Kreidler purports to protect consumers, to the contrary, well over 1 million Washington residents will very soon face double-digit rate increases on auto, homeowners and renters insurance even though there has been no change in their individual risk profiles,” Howard said.
In the same release, Howard disputed Kreidler’s assertion that credit scores have been impacted by the pandemic and argued he was circumventing the state legislature.
Despite their opposition, insurance companies will follow state law, Howard said in a news release.
“Insurers always follow the law and that will be no different in Washington,” Howard said. “We look forward to the next steps in the litigation process.”
Kreidler said in a news release that he felt personally insulted by the arguments that he exceeded his authority and is hurting consumers.
“Since I first became insurance commissioner over 20 years ago, I have heard from consumers harmed by this practice and their stories have stayed with me,” Kreidler said. “Many cannot understand what their credit scores have to do with how they drive or maintain their property.”
He claims the insurance industry has subsidized more well-off customers at the expense of those with lower incomes.
“This rule will protect those who are the most hurt financially by the pandemic from being forced to pay even higher premiums that subsidize those whose finances have actually improved during the pandemic,” Kreidler said. “It will also protect those whose will see their credit scores plummet when pandemic credit reporting protections end.”
Kreidler indicated he intends to continue the ban beyond the emergency conditions set by the pandemic because he believes this policy perpetuates systemic racism.
“In the meantime, I will continue the fight to permanently ban credit scoring when the Legislature returns in 2022,” Kreidler said. “For now, I welcome the court’s just decision that consumers must be protected.”
About 200 companies sell policies for auto, homeowner and renters insurance in Washington state, according to a news release. All of them now have until May 6 to file rating plans that comply with the ban which will take effect June 20, the release says.