Insurer Group Sues to Stop Washington Insurance Commissioner’s Credit Scoring Ban

April 7, 2021

The American Property Casualty Insurance Association is suing to halt emergency regulations recently filed by Washington Insurance Commissioner Mike Kreidler to ban the use of credit-based insurance scores in the rating and underwriting of insurance.

A petition for declaratory and injunctive relief was filed today in Superior Court in Thurston County, which asks the court to declare the commissioner’s action invalid and enjoin its enforcement.

The action seeks to prevent Kreidler from acting beyond the scope of his authority and requires him to comply with existing statutes governing the use of credit-based insurance scores by the insurance industry, among other statutes, according to the APCIA.

“Commissioner Kreidler is attempting to prohibit an important risk-based rating tool that has been in place for nearly 20 years for the benefit of consumers,” Claire Howard, APCIA senior vice president, general counsel, and corporate secretary, said in a statement. “The Commissioner is attempting to circumvent the Washington Legislature by taking an action the Legislature recently explicitly rejected.”

Kreidler recently issued an emergency order last month prohibiting insurers from using a consumer’s credit score to price auto, renters and homeowners coverage. He’s been working to eliminate credit scores from insurer consideration for some time. His most recent effort failed when a bill he backed, Senate Bill 5010, was gutted by an insurance industry amendment in the Senate Business, Financial Services & Trade Committee on Feb. 15.

Consumer Reports at the time applauded Kriedler, arguing that use of credit scores for setting insurance rates unfairly discriminates against consumers with lower incomes and has a disproportionately negative impact on communities of color.

“It is fundamentally unfair to penalize consumers with higher insurance rates just because they have a less than stellar credit score,” said Chuck Bell, programs director for advocacy for Consumer Reports, said in a statement. “Your credit score has nothing to do with whether you are a responsible driver, renter or homeowner and shouldn’t impact how much you pay to insure your property.”

According to APCIA, Kreidler’s actions will harm more than a million insurance consumers in Washington, who today pay less for auto, home, and renters insurance because of the use of credit-based insurance scores to effectively predict risk and set accurate rates.

“Most consumers save money when credit-based insurance scores are used to assess how much they pay for insurance,” Howard said. “Insurance scores are not credit scores like the ones used by banks to offer loans or credit cards. Insurers use specific information about how consumers use credit as one factor to give consumers the most affordable and accurate rate. Many other factors go into how much you pay for insurance, but not race or income. Without these tools, insurance rates could go up for more than a million Washingtonians who are already struggling to pay bills during the COVID-19 pandemic recession.”