Washington insurance rate calculation for property coverage cannot use credit scores

Washington insurance rate calculation - person holding credit card and using computer

Commissioner Kriedler has banned the use of this factor for three years following the pandemic’s end.

State Commissioner Mike Kreidler’s office has announced that he has issued an emergency rule banning Washington insurance rate calculation from using credit scores as a factor. This rule will remain in place for property insurers for three years following the declaration of the end of the current COVID-19 pandemic.

The new emergency rule will be applicable to homeowners, renters, and auto insurance premiums.

“The insurance industry’s dependency on the discriminatory practice of credit scoring has always been unfair,” said Kreidler in his statement about the emergency rule. “But given that the federal protections from plummeting credit scores could end soon, we need to take action now to protect the public.”

This new rule has arrived following a bill that would have placed a permanent ban on using credit scores from being used to calculate premiums was stalled in the Legislature following its amendment.

The Washington insurance rate calculation rule was in response to temporary federal protections.

According to Kreidler, this emergency rule was important as there is currently a temporary federal protection in place against reporting certain negative credit information. That federal protection will stop 120 days after the president’s declaration of the end of the COVID-19 pandemic national emergency. Therefore, says Kreidler, bureaus currently collecting people’s credit histories are drawing on a history that is not accurate. As a result, credit scores are “unreliable”.

Kreidler explained his concern is that credit scoring is disproportionately impacting lower income individuals and communities of color. He also pointed out that individuals in the state with lower credit scores risk being charged almost 80 percent more for auto coverage than those with good credit scores. Therefore, it will be omitted from Washington insurance rate calculation until three years after the pandemic is deemed over so that people’s credit information will have the opportunity to become more reliable and accurate.

Washington insurance rate calculation - person holding credit card and using computer“This removes that super accurate tool and dumbs down the rating process, and that means that people who should be paying less will end up paying more, and we don’t think that’s fair,” pointed out NW Insurance Council President Kenton Brine.

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