A Washington bill to ban insurers from using consumers’ credit scores to determine auto and homeowner insurance premiums was gutted by an insurance industry amendment in the Senate Business, Financial Services & Trade Committee on Feb. 15.
Senate Bill 5010, backed by Insurance Commissioner Mike Kreidler, would limit the use of consumer credit history for a period of three years and ensure that insurance does not become more unaffordable for people encountering financial challenges brought on by the pandemic.
The bill was amended and placed on a second reading by the Rules Committee.
Kreidler has long called insurers’ use of credit scoring unfair and has requested a ban twice, first in 2001 and later in 2010.
Now, as consumers struggle with the economic fallout of the coronavirus pandemic, he has called a ban on credit scoring critical because he says many people will suffer financially for years to come.
“Once again, the insurance industry is asserting its muscle in Olympia,” Kreidler said in a statement. “At a time when they’re raking in billions in excess virus-driven profits, they’re working against the policyholders they claim to protect. Considering the economic peril so many are facing and our country’s confrontation with its failure on racial justice, I had hoped that we’d see everyone rally around a solution that puts consumers first.”
He said the amended legislation from the insurance industry offers no long-term protection to consumers harmed by insurers’ use of credit scoring.”
Mark Sektnan, vice president of the American Property Casualty Insurance Association, said most people save money when credit is used.
Most people save money when credit is used to assess how much you pay for insurance, which is why lawmakers recognized it was not the time to add to the burden of families already struggling to make ends meet during the COVID-19 recession,” Sektnan said.
Citing a recent poll that showed 55% of Washingtonians save money on their car insurance when credit is used to assess how much they pay, he said the amended bill is a compromise.
“Insurers want to help make insurance more affordable,” he said. “COVID-19 is forcing families to make painful decisions about budgets, like choosing between medicines, groceries or insurance. Families need extra help if the unthinkable happens like death of a spouse, loss of a job or even a pandemic.”
Kreidler argues the substitute bill would limit relief and allow even short-term assistance to rapidly expire.
The industry amendment only applies to policies that are renewing, which means all new property insurance policies will be priced based on consumers’ existing credit scores.
“This insurance industry designed this bill to make sure you stay with your current company,” added Kreidler. “That’s a great incentive for the industry and a bad deal for consumers. Credit scoring is an insidious industry tool that for too long has subsidized the well-off at the expense of punishing low-income people and many people of color. The insurance industry’s bill maintains this inequity. I do not support this watered-down bill and am committed to seeing that we get a full ban in our state.
Was this article valuable?
Here are more articles you may enjoy.