Washington State Insurance Commissioner Mike Kreidler has again passed a rule prohibiting insurers from using credit scoring to set auto, home and renter’s insurance rates.
The rule takes effect March 4 and lasts for three years after federal and state pandemic-related emergency financial protections end, whichever is longer.
The decision follows a Washington State Superior Court ruling in October against Kreidler’s emergency order barring the use of credit history when determining private insurance rates. In the meantime, Kreidler held a series of committee hearings to get additional information from insurance companies about how they factor credit scores into setting premiums.
According to the office of the insurance commissioner, “only 12 companies representing 5.2% of the relevant market provided the information requested by Kreidler”. Subsequently, Kreidler proposes “a rule that requires insurers to provide policyholders with clear written explanations for any rate change.”
“If an insurer wants to change the amount you pay for coverage, you deserve to know why,” Kreidler wrote in a press release. “And it shouldn’t be difficult to understand the reasons that led to the change. If your insurance company wants your business, you deserve an honest and clear answer. We will help them give you one with this rule.
The ban on leveraging credit score to determine rates is intended to be a stopgap until this level of transparency is achieved.
“Contrary to what people might believe about how credit information is used, it is actually used to provide good credit discounts to many drivers and owners,” said Kenton Brine, president of the trade group. local Northwest Insurance Council, to Gee Scott and Ursula of KIRO Newsradio. Reutin show.
“So when you take that out, what we’ve seen, as we warned, a lot of rates have gone up for a lot of people, and in some cases people who are the lowest risk insurance in the state. “
Brine is adamant that the credit scores used to create insurance ratings and subsequent rate setting provide accurate information about the likelihood of filing insurance claims.
“In the mid to late ’90s, I guess, they started to realize there was a strong correlation between people’s credit history, how responsibly they used access to credit, and how likely they were to to have accidents and file insurance claims,” Brine continued.
In this sense, Brine disavows the rhetoric that Kreidler uses in his plea for the banning of credit ratings in determining rates: “I take this action against insurers’ use of credit rating in response to the economic harm that many people have suffered during the COVID -19 pandemic – harm that has had a significant impact on people who are already financially vulnerable,” Krediler wrote in a recent press release.
“I don’t agree with the idea that it’s penalizing,” Brine continued. “What insurers are trying to do is figure it out as best they can, looking at a lot of large groups of people trying to put data together to predict your likelihood of having claims, and then charging you a rate proportional to that. risk.”
“When you take away an accurate rating tool, a predictive rating tool, you’re essentially obscuring the information the insurer has about you,” Brine said. “And that makes it harder to place you in a group that looks like you, and you pay a rate that’s closest to what you’re expected to pay.”
Brine had the following advice for those who have recently suffered rate increases, resulting from Kreidler’s order: “Do what thousands of other people have done across the state over the past year and contact the insurance commissioner. Reach out to your legislators and say, “we need relief.”
“It’s not the result of insurers’ arbitrary decision to raise rates. It’s a direct result of taking out a good credit cut. And in fact doing it through the process of rule-making, without even using existing laws,” Brine said. “It’s a rule that was imposed by the insurance commissioner.
“It’s happened to maybe a million or more policyholders in Washington, and, for some, those increases have been severe.”
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