For Consumers

Final order on court's credit scoring decision; Kreidler will not appeal

Judge said rule did protect people from improper discrimination

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August 29, 2022

OLYMPIA, Wash. – Washington state Insurance Commissioner Mike Kreidler and the National Association of Mutual Insurance Companies and American Property Casualty Insurance Association have agreed to a final order  in response to the recent Thurston County Superior Court ruling on Kreidler’s credit scoring rule. Kreidler will not appeal the court’s decision. 

Thurston County Superior Court Judge Indu Thomas had previously issued an oral ruling  stating that Kreidler’s office did not violate the Administrative Procedure Act and that the commissioner’s actions were not arbitrary and capricious as the proponents argued. However, she did find that Kreidler exceeded his authority in adopting the rule to temporarily ban credit scoring when there was a specific state statute that allowed insurers to use credit scoring. 

Her oral ruling included support for the intent of the rule and the consumer protections it provided, declaring, “the record reflects and the court does not question whether that rule protects Washington residents who are entitled to be free of improper discrimination in how their insurance rates are set.  It is well established that there is an undeniable link between race and poverty, and any policy that discriminates based on credit worthiness correspondingly results in a disparate impact on communities of color. The temporary rule does in fact protect from such discrimination.”

Kreidler’s office based its argument for the rule that temporarily suspended the use of credit scores on its authority to make sure insurance premiums are not excessive, inadequate or unfairly discriminatory. Judge Thomas ruled that this authority is not sufficient because of a specific state law that allows insurers to use credit scoring.

“I adopted the credit scoring rule because I believed it was good public policy and would protect policyholders financially impacted during the pandemic,” said Kreidler. “Obviously, I’m disappointed by the ruling, but I was heartened to hear the judge affirm that our temporary rule protected consumers from discrimination.” 

In an affidavit to the court, Senator Mark Mullet who chairs the Senate Business, Financial Services and Trade Committee said, “policy choices such as considering whether social concerns justify banning an actuarial sound insurance practice are uniquely the province of the democratically elected legislature.”

Kreidler has always agreed that the issue must be addressed by the Legislature, “The court clearly understood that any policy that discriminates based on credit worthiness harms communities of color. I hope those elected to serve all Washington consumers will listen to every policyholder impacted by this unfair practice.” 

Earlier in this case, the court entered a stay on the credit scoring rule. During this time, some insurers went back to using credit scoring to set rates and others did not. Combined with the OIC decision not to appeal further, today’s written final order eliminates the rule, giving insurers the option of reverting back to using credit scoring.