Washington State Insurance Commissioner Mike Kreidler passed a rule prohibiting insurers from using credit scoring to set auto, home and renter’s insurance rates for three years after financial protections end federal and state emergencies related to the pandemic, whichever is longer.
The rule was announced on Tuesday and will go into effect on March 4. Kreidler’s office said it began the process of implementing a permanent rule after an emergency rule issued by the commissioner last year was struck down by a court. The court found that there was no justification for circumventing normal rule-making procedures.
Kreidler said he was also proposing a new rule that would require insurers to provide policyholders with a written explanation of any premium changes.
“We know that now, more than ever, credit reports are unreliable,” Kreidler, a Democrat, said in a written statement. “It is unfair to base the amount of often compulsory insurance on an unreliable and fluctuating factor like credit score.
Kreidler said that once federal pandemic protections end, people who have struggled financially in the past two years are likely to see delinquencies appear on their credit reports.
He noted that insurers charge nearly 80% more good drivers with low credit scores for mandatory car insurance.
Republicans have denounced the move, saying it will incur additional costs for people on fixed incomes, like seniors, who have benefited from reduced insurance rates because of their good credit scores.
“They are now placed in an untenable position where they are not receiving more revenue and they are seeing a rate increase of several hundred dollars,” Republican Sen. John Braun said.
Two other states do not allow homeowners’ credit scoring and auto insurance rates: California, which passed a ballot measure in 1988, and Massachusetts. Maryland allows credit scoring to determine auto insurance rates, but not for homeowners, and Hawaii allows credit scoring for home insurance, but not auto.
Kreidler said he plans to use the time while the ban is in effect to work with the legislature, consumer groups and the insurance industry in an effort to permanently end the use of credit rating. credit in setting insurance premiums.