Two measures approved over the weekend by the Washington State House and Senate restricting insurers’ use of credit scores could result in higher rates for the majority of policyholders, the American Insurance Association (AIA) reports.
“Credit scores enable insurers to price policies accurately so policyholders are paying premiums which reflect their potential for losses,” said Bill Gausewitz, AIA assistant vice president, western region. “Numerous studies have shown a clear correlation between a consumer’s credit history and his or her future insurance losses. The majority of policyholders pay lower rates because this tool enables insurers to accurately price their product.”
HB 2544 and SB 6524 would:
— Restrict insurers from using credit scores for cancellation or renewal decisions; — Require insurers to notify an applicant of the reasons for an adverse decision made based on credit history information; and
— Allow an insurer to use credit scores to deny coverage only in combination with other significant underwriting factors.
“The use of credit scores allows insurance companies to offer insurance to more people,” said Gausewitz. “Credit scores have increased competition in the auto insurance market and this gives more consumers a broader range of choices.”
“We will continue to negotiate with Insurance Commissioner Mike Kreidler and the sponsors of these bills to develop a proposal that will not hinder the use of this objective and consistent underwriting and rating tool,” said Gausewitz.
Over the weekend the Washington House approved HB 2544 on a vote of 93-4 and the Washington Senate approved SB 6524 by a vote of 33 to 15.
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