WA ban on using credit scoring for insurance on hold as lawsuit continues

A rule that would ban insurers in Washington state from considering a person’s credit score when setting rates will not go into effect this week, as previously planned, as the state and insurance industry groups have agreed to a pause while courts consider the industry’s lawsuit to block the rule.

Washington Insurance Commissioner Mike Kreidler announced a temporary rule last month that would ban the use of credit scores when setting rates for car, homeowner and renter insurance. Three insurance industry groups announced a lawsuit in Thurston County Superior Court two days later. The rule was to go into effect Friday.

“The parties have agreed to a temporary stay until the requested hearing occurs in May,” Stephanie Marquis, a Kreidler spokesperson said. She said the hearing has not yet been scheduled.

Kreidler has for years sought to ban the use of credit scores in setting rates, both legislatively and administratively. But bills he’s proposed have failed to gain traction in the state Legislature and this is the second time a court has halted, or at least stalled, his move to ban the practice through the rule-making process.

Kreidler has argued that credit scores are unreliable and an unfair way to determine rates for insurance that is, in many cases, mandatory. He’s argued that the practice is unfair to those with low income who often have lower credit ratings, a situation that might not say anything about a person’s use of insurance.

“What does your credit information have to do with how you drive your car or maintain your property?” Kreidler, a Democrat, wrote in 2020, as he urged the Legislature to act. “Shouldn’t your insurance premium be based on these factors or on how many claims you’ve filed and the cost of those claims?”

He’s said that insurers often charge good drivers with poor credit scores 80% more for auto insurance, and that people with good credit and DUI convictions often pay less than those with bad credit and clean driving records.

The insurance industry and Republicans have argued that the rule change will cause rates to go up for people with good credit, including the elderly and those on fixed incomes.

“Here we were, in the middle of a pandemic, with thousands of people unemployed, many businesses on life support, and working families struggling to put food on the table,” Sen. Jeff Wilson, R-Longview, said in a prepared statement Thursday. “And Kreidler came along and decided he wanted to give a break on insurance to people with bad credit, by jacking up insurance rates for everyone else.”

Wilson called for Kreidler to resign, after a report from Northwest News Network that he has verbally mistreated staff.

Kreidler said the rule is designed to be “rate neutral” for insurers, so any rate changes get spread across the entire pool of policyholders.

People with good credit could see a one-time rate increase, while those with bad credit would see a one-time rate decrease, depending on how much their insurer relied on credit scoring, Kreidler’s office said.

Two other states don’t allow credit scoring for both homeowners and auto insurance rates: California, which passed a ballot measure in 1988, and Massachusetts. Maryland allows credit scoring to determine rates on auto insurance, but not homeowners, and Hawaii allows credit scoring for homeowners insurance but not auto.

Information from The Associated Press is included in this report.