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Ban on insurance credit scoring sought

On Behalf of | Jul 1, 2020 | Insurance Law |

Washington allows credit scoring for property, renters, and life insurance. But the state’s insurance commissioner, Mike Kreider, is seeking to change its insurance law to end credit scoring because of the recent economic shutdown and it unfair racial impact.

Use of credit can affect the cost of insurance premiums. A credit score includes consideration of some, but not all, of a person’s credit history for calculating how the person will likely manage their exposure to risk. According to Commissioner Kreider, the insurance industry justifies the use of credit scores on the belief that people with lower credit scores are more likely to file insurance claims.

But there is plenty of information that can help determine premiums without loss of profit, according to commissioner Kreider. He said there is no justification for this objectionable and unfair practice which penalizes consumers who suffered losses in this recent business downturn and people with lower and unfairly affects people of color.

Commissioner Kreider is asking the state legislature to amend two laws that allow insurers to set rates. If the changes are enacted, insurance companies can continue to use age, gender, residence and other factors to set premiums.

Currently, Washington prohibits using credit history for denial of coverage or for cancelling policies. Insurers may not use medical debt and other certain credit factors for determining rates.

The American Property Casualty Insurance, an industry trade group, said that most consumers save money when credit-based insurance scores are used. It recommended passage of the National Council of Insurance Legislators’ Credit-Based Insurance Scoring Model Act because it includes special life circumstance exceptions to the use of credit information.

An attorney can help protect your right to insurance coverage. They may also assist with holding insurance companies accountable under Washington law.