Nevada Supreme Court Upholds Temporary Ban on Insurers Using Credit Scores

February 17, 2023

The Nevada Supreme Court upheld the Nevada Division of Insurance’s temporary ban on using credit information to help set insurance rates.

The division in 2020 imposed the temporary ban, concluding that the pandemic had a disproportionately negative impact on policyholders’ credit information. The National Association of Mutual Insurance Companies unsuccessfully challenged the rule issued by the division.

The rule that was upheld prohibits insurance companies from using credit-based insurance scores to increase premiums until May 2024.

The Consumer Federation of America and the Center for Economic Justice jointly submitted an amicus curiae brief to the Supreme Court.

The consumer groups said the decision was an important protection for Nevada drivers.

“State law requires all drivers to carry auto insurance and banks require homeowners to maintain coverage as well,” Douglas Heller, director of insurance for Consumer Federation of America, said in a statement. “This rule will ensure that for the next year, people who are trying to get back on their feet won’t be penalized on their insurance premiums just because the pandemic created financial hardships.”

NAMIC said credit scoring scoring helps keep rates lower and more accurate.

Erin Collins, NAMIC’s senior vice president of state and policy affairs, noted taht the judge’s decision did not focus on the merits of credit-based insurance scores in ratemaking, but on the relative authority of the insurance commissioner in rulemaking.

“The impact of the decision will be less accurate insurance pricing and increased insurance rates for many Nevada drivers,” Collins said in an emailed statement. “The commissioner’s original conclusion that the pandemic had a disproportionately negative impact on policyholders’ credit information is simply not borne out by the facts. The use of credit-based insurance scores is actuarially sound, benefits a majority of drivers, and is extremely predictive of risk.”

She added: “NAMIC remains hopeful that this rule will be reevaluated and rescinded, restoring the use of this valuable tool and its cost savings for consumers.”

Nevada isn’t the only state where wrangling is occurring over credit-scoring bans in insurance ratemaking.

Washington Insurance Commissioner Mike Kreidler tried to ban credit scoring by insurers, but a judge last year ruled he exceeded his authority when he issued a permanent rule banning the use of credit-based insurance scores.

More recently, a Thurston County Superior Court judge rejected an attempt by PEMCO Mutual Insurance Co. and subsidiaries of the Progressive Corp. to stop an investigation by Attorney General Bob Ferguson into what his office potential race discrimination against Washington drivers.

The companies both use consumer credit histories to decide whether to sell, and at what price to sell, their auto insurance products. This is despite evidence that this practice disproportionately harms people of color, according to Ferguson’s office.

Related:

Topics Carriers Nevada

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