Washington Insurance Commissioner’s Move to Ban Credit Scoring Getting Mixed Reviews

An order to ban insurers to use credit scores from Washington Insurance Commissioner Mike Kreidler is getting praise as well as drawing fire.

Kreidler recently issued an emergency order prohibiting insurers from using a consumer’s credit score to price auto, renters and homeowners coverage. He’s been working to eliminate credit scores from insurer consideration for some time. His most recent effort failed when a bill he backed, Senate Bill 5010, was gutted by an insurance industry amendment in the Senate Business, Financial Services & Trade Committee on Feb. 15.

The American Property Casualty Insurance Association, the National Association of Mutual Insurance Cos. and the Northwest Insurance Council on Tuesday said Kriedler’s actions exceed his statutory authority, violate the separation of powers between the executive and legislative branches of government and could be in direct conflict with the existing statutes.

“On behalf of insurance companies that write the vast majority of auto, home and renters insurance policies in Washington, our associations and our members strongly oppose the unilateral action taken today by Washington Insurance Commissioner Mike Kreidler, action that exceeds his authority, defies the legislature, and robs consumers of the benefits of a highly competitive private market,” the group’s said in a combined statement.

The groups said Kreidler’s “arbitrary and capricious actions” will harm the majority of Washington insurance consumers, who pay less insurance because credit-based insurance scores to effectively predict risk and set accurate rates.

“Commissioner Kreidler is eliminating a tool that enables insurers to provide more affordable rates for many Washington drivers, homeowners, and renters at a time when they need them most,” the groups said.

Consumer Reports applauded Kriedler, arguing that use of credit scores for setting insurance rates unfairly discriminates against consumers with lower incomes and has a disproportionately negative impact on communities of color.

“It is fundamentally unfair to penalize consumers with higher insurance rates just because they have a less than stellar credit score,” said Chuck Bell, programs director for advocacy for Consumer Reports, said in a statement. “Your credit score has nothing to do with whether you are a responsible driver, renter or homeowner and shouldn’t impact how much you pay to insure your property.

Related:

• Washington Bill to Ban Insurers from Using Credit Scores Heads to Senate
• Credit Scoring Battle Brewing Between Washington Commissioner and Insurer Groups
• Washington Commissioner Tells Insurers It’s Time to Ban Credit Scoring

Topics Washington