Large breaches of consumers’ personal information are becoming more and more common and, in response, some consumers are placing freezes on their credit information.
We've heard from some consumers that after placing a credit freeze, it's affected their insurance premiums. If you get an adverse action notice from your personal auto, homeowner, condo, mobile and manufactured home and/or renter insurance company telling you your premiums are going up because you froze your credit, file a complaint with our office. We will find out if your company can do that. Regardless, the company must:
- Notify you via an adverse action notice.
- Tell you specifically why they're raising your premiums.
As of June 6, 2018, Washington state passed a protective law (RCWs 19.182.170 and 19.182.230) that does not allow credit reporting agencies to charge consumers for:
- Placing a security credit freeze on their credit report
- Assigning a unique PIN
- Temporarily lifting or removing a security freeze
Here are some frequently asked questions we've received from consumers on this issue:
How does a credit freeze affect my insurance premiums?
Some companies are having no trouble accessing consumers’ credit information to issue new or renew auto, homeowner and renter insurance policies. However, other companies are informing consumers through an "adverse action notice" that they're unable to see the consumer's credit information and as a result, will increase their premiums.
How will I know if my insurer raised my premiums because my credit is frozen?
Insurers are required to notify consumers if their credit history affects their insurance premiums. This is called an “adverse action notice” and they have to send it to you within 30 days of the premium change. If you receive an adverse action notice, you should call your insurance company and find out exactly why your premiums went up.
If they tell you it’s because your credit information was not available to them, you have a few options:
- You can temporarily unfreeze your credit to allow the insurance company to see your credit information.
- If your insurance company told you your premiums increased specifically due to a credit freeze, you can file a complaint with the insurance commissioner. Our consumer advocates can look at your policy to find out if the company is charging you more because of a credit freeze. NOTE: It is legal in Washington state to raise premiums if you have a low credit score.
What is the difference between no hit, no score and a credit freeze?
- No hit: The consumer does not have a credit history.
- No score: There’s not enough information to determine the consumer’s credit history.
- Credit freeze: A consumer has a credit score but contacted the credit bureaus to block anyone from accessing the information to reduce identity theft and fraud.
Why does the insurance commissioner allow insurance companies to use consumers’ credit scores?
Commissioner Kreidler has been a vocal opponent to companies’ use of credit information as a factor in setting consumers’ premiums. He tried unsuccessfully to ban this practice in our state, but the state Legislature allows the practice to remain in place.
Insurers are not required to use credit scores, but most do. If they do, they must check consumers’ credit scores every three years for two reasons:
- To make sure consumers credit information is consistently updated
- To give better premiums to consumers’ whose credit has improved