For Consumers

Kreidler: Industry favors profits over people in challenge to credit score rule

Insurers contend rosy scenario justifies no consumer protection from unfair practice

Contact Public Affairs: 360-725-7055

April 13, 2021

UPDATE: On April 15, 2021, Thurston County rescheduled the hearing for 11 a.m. on April 23, 2020.

The Zoom meeting ID is: 821 9697 0976

Passcode: 1234

OLYMPIA, Wash. – Insurance companies hiding behind their industry associations contend no financial emergency exists during the current pandemic and that lower-income consumers in Washington deserve no protection from the discriminatory use of credit scores. 

In a lawsuit filed last week, the American Property Casualty Insurance Association challenged Insurance Commissioner Mike Kreidler’s emergency rule to prohibit the use of credit scores to set rates for auto, homeowner and renters insurance. The lobbying association bills itself as representing the nation’s biggest and most profitable insurance companies in the United States. 

Kreidler filed his response today to the association’s lawsuit that challenges his authority to protect insurance consumers from discrimination in anticipation of the end of the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. Kreidler issued an emergency rule March 23 prohibiting insurers from using credit scoring to set rates for personal property for three years. 

A hearing on the lawsuit is set for 9 a.m. April 16 in Thurston County Superior Court.

“What’s telling about the industry is the desire to maintain the status quo and not accept responsibility for the continued use of unjust and secretive credit scoring models to protect their profits at the expense of lower-income consumers and people of color,” Kreidler said. “These are the people who pay more for insurance because of the industry’s blatant discrimination. The industry wants to keep a tight grip on an insidious practice that keeps lining their pockets at the expense of those least able to afford it.”

Even a study cited by the industry in its challenge argues that the federal CARES Act should be maintained to protect consumers: 

“The protections afforded by the CARES Act, as well as the payment assistance and relief offered by the financial institutions since COVID-19 was declared a national emergency, seems to be helping the average consumer. We’ll continue to track this as time goes on and see if we notice a shift. We’re hopeful for an extension and continuation of these protections, especially for consumers that are adversely impacted by the pandemic, to ensure that there is minimal impact on their credit profile.”

The federal CARES Act placed a temporary hold on the reporting of certain negative credit information. As a result, bureaus are currently collecting a credit history that is inaccurate for some consumers and producing unreliable scores. Insurers rely on these numbers to produce their scoring models to set premium rates for policyholders. 

“The credit score protections will end and there will be a tsunami of delinquencies reported,” Kreidler said. “That’s when those least able to manage the financial fallout could be severely harmed. The industry has little to no regard for these people. Insurers have many other ways to determine appropriate rates for premiums. They should use those and end the unjust reliance on credit scores.”  

Kreidler’s emergency rule took effect immediately and lasts for 120 days. He is undertaking standard rulemaking to maintain these protections after the emergency rule expires. 

Read more about insurance and credit scoring.