Washington Commissioner Adopts 3-Year Credit Scoring Ban, Proposes Transparency Rule

February 1, 2022

Washington Insurance Commissioner Mike Kreidler has adopted his rule banning insurers from using credit information to set auto, homeowner and renter insurance for three years.

Kreidler’s rule temporarily banning credit scoring will be in effect starting March 4 through three years after either the federal or state emergency declaration ends, whichever is longer.

Kreidler is also proposing a new “transparency rule” requiring insurers to provide policyholders with a written explanation for any premium change.

“I’m taking this action against insurers’ use of credit scoring in response to the economic harm many people have experienced during the COVID-19 pandemic—harm that has significantly impacted people who are already financially vulnerable,” Kreidler said in a statement. “We know that now, more than ever, credit reporting is unreliable. It is unfair to base how much someone pays for frequently mandatory insurance on an unreliable and fluctuating factor like a credit score.”

Washington Insurance Commissioner Mike Kreidler
Washington Insurance Commissioner Mike Kreidler

Kreidler’s rule is designed to be rate neutral for the insurers, meaning any rate change is spread across all policyholders, according to a statement from his office.

Some will see a one-time rate increase and others will get a rate decrease, depending on how much their insurer relied on credit scoring.

Kreidler asked insurers to provide additional information, including:

  • A histogram that shows the range of premium changes due to removing credit information as rating factor. Some insurers already provided these illustrations as part of their rate filings.
  • Copies of any communications insurers used to describe the new credit rule to their policyholders.

Only 12 companies representing 5.2% of the affected market provided the information Kreidler requested.

The American Property Casualty Insurance Association has been fighting Kreidler on this scoring ban.

In April, the APCIA along with other insurer groups filed a petition for declaratory and injunctive relief in Superior Court in Thurston County, which asks the court to declare the commissioner’s action invalid and enjoin its enforcement. The APCIA has said the ban will mean “higher premiums for more than a million low-risk policyholders who purchase auto, homeowners’ insurance, renters’ insurance, and other personal lines of coverage.”

“Commissioner Kreidler has taken the unprecedented action of adopting a permanent rule to chill legislative efforts to make credit-based insurance scores work for Washington consumers,” Claire Howard, APCIA senior vice president, general counsel, and corporate secretary, said in a statement. “Additionally, the commissioner ignored thousands of letters sent to him and the Legislature by consumers opposing his rule, detailing how this action has forced them to make difficult financial sacrifices.”

Howard’s statement notes that Kreidler’s predecessor emergency rule was declared invalid in September by order of a Thurston County Superior Court judge.

“APCIA strongly opposes this misguided rule for a variety of legal reasons and is disappointed that Commissioner Kreidler is ignoring the legislature and harming Washington policyholders,” the statement continues.

Kreidler is also proposing a rule that requires insurers to provide policyholders with clear written explanations for any rate change. This proposed rule will include stakeholder involvement and a public hearing.


Topics Carriers Washington

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