For Consumers

Over 50 insurers meet deadline to comply with emergency rule on credit

Initial analysis: Some consumers likely to see premium cuts of 60%

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May 7, 2021

OLYMPIA, Wash. – Insurance Commissioner Mike Kreidler announced that more than 50 insurance companies met the May 6 deadline to file rating plans that comply with his emergency rule to temporarily prohibit the use of consumers’ credit scores.  

The temporary ban on the use of credit scores for insurance takes effect June 20. Companies that failed to meet the deadline are in violation of state law and are subject to disciplinary action by Kreidler’s office.

Approximately 200 companies are licensed to sell auto, homeowner and renter insurance in Washington. However, not all companies licensed to sell property and casualty policies offer them in the state. 

The companies reported that at least 1.3 million policyholders should expect rate changes – some will see decreases of up to 60%. The new rating plans must be revenue-neutral, meaning insurers cannot attempt to increase their profits using the lack of credit scores as an excuse.

“The people who need it most will get relief on their home, auto and renter insurance premiums,” Kreidler said. “The insurance market will undergo a period of adjustment while the rates level out. Insurance companies may begin submitting refined plans in the coming months that consider the factors that really matter – how safely you drive and how well you maintain your property. These are the factors that they should have been using for the past two decades instead of credit scores that punish those with lower incomes, especially during the pandemic.” 

The emergency rule is effective June 20, but rate changes will not happen immediately. Consumers will begin seeing changes to their premiums during individual renewal periods, which can occur at different times depending on when policyholders bought coverage. 

“The industry associations have put out scare tactics lately about how they’ll be forced to increase premiums because they can no longer use an unreliable practice,” Kreidler added. “No one should fall for these tactics. If the companies want to retain their policyholders and remain competitive, they should be up front and rely on risk factors that have a real bearing on what you should pay for coverage.”

The insurance industry has so far been unsuccessful in its challenge of Kreidler’s rule issued March 23. A Thurston County Superior Court judge on April 23 denied an insurance industry request for a preliminary injunction. The court found that industry associations were unlikely to succeed with their two main arguments that Kreidler lacked “good cause” and had no authority to issue the rule. 

Kreidler said the rule will protect those who are the most hurt financially by the pandemic from being forced to pay even higher premiums. Drivers in Washington with safe records and low credit scores pay 79% more for coverage than those with poor driving records but higher credit scores, according to a study by the Consumer Federation of America.

It will also protect those who will see their credit scores plummet when the state and federal protections under the CARES Act come to an end.