OLYMPIA – Citing the devastating economic impact of the coronavirus pandemic and the need to end racial discrimination in our institutions, Insurance Commissioner Mike Kreidler is calling on the insurance industry to end its unfair and discriminatory practice of using credit scoring in auto, property, renters and life insurance.
“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,” said Kreidler. “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.
“People will feel the economic impact of this pandemic for years to come,” he added. “They don’t need to be hit even harder by their insurance company. 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.
His proposal has early support and will be sponsored by Sen. Mona Das, D- Kent and Rep. Steve Kirby, D-Tacoma.
Insurers have claimed in the past that many people benefit from the use of credit scoring, but Kreidler argues, “How insurers use your credit information is a big dark secret. Even I don’t get to see the data or how it’s weighed against other information they collect. Insurers should not be able to use these economic times to their advantage. They have plenty of other information they can use to price fairly.”
Kreidler has sought a ban on insurers’ use of credit scoring several times since 2001 and succeeded in limiting its use. Today, insurers cannot use your credit history to deny you coverage or cancel your policy and are prohibited from using certain credit factors, such as medical bankruptcy, to determine how much you pay. But insurers will not reveal what weight they give to items in your credit history or how much anyone factor could impact your premium.