Bills Restricting Use of Credit-Based Insurance Scores Introduced in Wash.

According to the National Association of Independent Insurers (NAII), companion bills severely restricting insurers’use of credit-based insurance scores have been introduced in the Washington State House and Senate. Gov. Gary Locke and Atty. Gen. Christine Gregoire have joined Insurance Commissioner Mike Kreidler in requesting the legislation.

NAII Northwest Regional Manager Michael Harrold expressed disappointment that backers of House Bill 2544 and Senate Bill 6524 are discounting the evidence that using insurance scores enable insurers to insure more people, and at a lower cost for most of them.

The legislation, initiated by Kreidler, would prohibit insurers from denying, canceling or refusing to renew personal insurance due in whole or in part to an insured’s credit history. The legislation also proposes a 20 percent cap on the differential in an insurer’s rates that can be based on an insurance scoring factor. The 20 percent cap would apply across all rating tiers or policies issued by affiliated companies.

Harrold explained to an interim legislative hearing last month how the use of insurance scores benefited most consumers, in terms of both price and availability of insurance.

“Using credit scores enables insurance companies to offer most of their customers lower rates and to write and renew more policies,” he asserted.

“It enables insurers to more aggressively and confidently write in all markets, including urban areas. Most importantly, insurers’ use of insurance scores provides a fair pricing structure by better matching rates with the risk of loss.

“Imposing uniformity on how insurers use insurance scores is counterproductive. The different ways insurers use credit information represents the essence of competition, which benefits the marketplace and consumers. Restricting the use of insurance scores may have the unintended consequence of negatively impacting both the affordability and availability of insurance.”

Harrold said NAII must oppose both HB 2544 and SB 6524 in their current forms, but that the NAII will continue to work with Kreidler and legislators to find a way to better address their concerns.