Using credit scores to set insurance premiums temporarily banned in Washington

OLYMPIA — Insurance Commissioner Mike Kreidler issued a temporary emergency rule Tuesday prohibiting insurers from using credit scoring to determine insurance rates, after an effort to ban the practice in state law failed in the Legislature.

The rule goes into effect immediately and will last for 120 days, according to a news release. Kreidler will attempt to set a permanent rule to go into effect up to three years after the COVID-19 pandemic state of emergency.

The decision is in anticipation of the end of the federal Coronavirus Aid, Relief and Economic Security Act, which placed a temporary hold on the reporting of certain negative credit information. As a result, bureaus are collecting a credit history that is inaccurate and unreliable, and could lead to discriminatory pricing that more greatly affects people with lower incomes and people of color, Kreidler said.

“The insurance industry’s dependency on the discriminatory practice of credit scoring has always been unfair,” Kreidler said in the release. “But given that the federal protections from plummeting credit scores could end soon, we need to take action now to protect the public.”

Legislation requested by Gov. Jay Inslee made its way through the state Senate earlier this session but failed to make it to the floor for a vote. It would have prohibited the use of credit history to determine insurance rates or premiums until June 30, 2024.

“It is discriminatory to use credit scores to set insurance rates because this practice results in low-income people and people of color paying more for insurance,” Inslee said in a news release.

When asked about the emergency rule, state Republicans told reporters it was too new to comment on but that they were concerned with the use of emergency powers by state officials. Senate Minority Leader John Braun, R-Centralia, said issuing an emergency rule on a bill the Legislature failed to pass is “actively concerning.”

Republicans have called for limits on the use of emergency powers by Inslee throughout the COVID-19 pandemic, but legislation to do so never made it to the floor.

“I have a lot of concerns about the fact that the barrier seems to be down on emergency rules of all kinds,” House Minority Leader J.T. Wilcox, R-Yelm, said.