Washington Insurance Commissioner Mike Kreidler is calling on the insurance industry to end its use of credit scoring in auto, property, renters and life insurance, citing the economic impact of the COVID-19 pandemic and the calls to end institutional racial discrimination.
“The use of credit scores in insurance is discriminatory and unjustly targets people of color, those with lower incomes and individuals and businesses struggling during the coronavirus pandemic,” Kreidler said in a statement. “The insurance industry claims that people with lower credit scores are more likely to file future insurance claims. I believe it’s inherently abhorrent, unfair and unjust. There’s plenty of information an insurer can use to determine your premium. They don’t need to use credit information to build up their profits.
He said that consumers will feel the economic impact of the coronavirus pandemic “for years to come.”
“They don’t need to be hit even harder by their insurance company,” he said. “It will be extremely hard for many people to improve their credit scores or even maintain their current score. They should not be penalized for circumstances that are no fault of their own.”
Kreidler is asking the Legislature to amend two state laws that currently allow insurance companies to help determine rates for consumers in Washington. The companies can continue to use other factors to set premiums, including age, gender, where a person lives, marital status and more, he noted
His proposal has early support and will be sponsored by Sen. Mona Das, D- Kent and Rep. Steve Kirby, D-Tacoma.
Mark Sektnan, vice president for state affairs for the American Property Casualty Insurance Association, the largest trade group representing the industry, argued that many states have adopted the National Council of Insurance Legislators’ Credit-Based Insurance Scoring Model Act, which includes extraordinary life circumstance exceptions to an insurer’s use of credit information.
“Rather than calling for a legislative ban on the of credit-based insurance scores, Commissioner Kreidler should consider adopting the NCOIL model law. The fairest way to determine what people pay for auto insurance is to use a variety of factors that provide insurers with a more complete picture of a consumer’s potential for filing a claim or having a loss. Credit-based insurance scores provide most consumers with savings,” Sektnan said. “The NCOIL model law can provide important additional consumer protections.”
Kreidler has sought a ban on insurer use of credit scoring before, an succeeded in limiting its use. Today, insurers cannot use credit history to deny coverage or cancel a policy and are prohibited from using certain credit factors, such as medical bankruptcy, to determine rates.