For Consumers

Kreidler supports new credit scoring bill – will testify Wednesday

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January 29, 2013

OLYMPIA, Wash. – Insurance Commissioner Mike Kreidler will testify this Wednesday in support of a new bipartisan effort to ban the use of credit information in homeowners insurance.

House Bill 1212 carves out homeowners insurance from the current state law which restricts insurance companies from using certain factors in your credit history to deny you coverage or determine your premium. If passed, this bill would prohibit insurers from using any of your credit information to deny you homeowners insurance or to set your premium.

Kreidler has repeatedly tried to ban credit scoring from all insurance ever since the industry started using it nearly 13 years ago, calling  it discriminatory and blatantly unfair – especially in today’s economy. He succeeded in limiting its use in 2001, but still believes an outright ban is justified.

“Thousands of consumers have contacted my office over the last several years, complaining about their insurance company’s use of credit scoring,” said Kreidler. “They say, ‘I pay my bills on time, I pay my premium, have never filed a claim – why is my premium going up?’ House Bill 1212 provides important protections for people who’ve been denied homeowners insurance or who’ve seen their premium go up, simply because of an arbitrary factor in their credit history.”

Today, your insurance company takes certain information in your credit history and other factors to create an “insurance score.”  The factors the company considers and how much weight is assigned to them vary, making it extremely difficult—if not impossible—for you to understand what steps you can take to improve your score and get a better rate.
The insurance industry argues that credit scoring rewards people for being responsible. But Kreidler says people who are making responsible decisions are being harmed by the practice.
He’s heard from consumers whose insurance rates were increased because they:

  • Consolidated their credit cards, lowered their credit card limits or canceled their cards.
  • Opted to buy a large ticket item with 12-months deferred interest.
  • Took advantage of a 10 percent discount if they used their store card to make a purchase.
  • Do not have enough active credit cards or bank accounts.
  • Opened a new credit card eight years ago to get frequent flyer miles.

“What do any of these choices have to do with how people treat their homes?” he asked. “Nothing.”
If passed, House Bill 1212 would prohibit insurers from using credit information to deny or set rates for homeowners insurance as well as mobile and manufactured homeowners, condominium owners, renters and earthquake insurance.

“I suspect that, just like in past attempts, the insurance industry will threaten that banning credit scoring will lead to higher insurance rates. In fact, the state of Maryland banned it from homeowners insurance eleven years ago and rates didn’t go up. I believe successful companies will find fair ways to reward responsible property owners with lower rates. After all, they want these people as customers.”

The bill, sponsored by Representative Cary Condotta of the 12th legislative district in Wenatchee, will be heard this Wednesday, Jan. 30 at 1:30 p.m. in Hearing Room B of the John L. O’Brien Building in Olympia.

Full text of HB 1212
Current law restricting insurers’ use of credit scoring