Washington, D.C.—Nevada consumers received $26,725,353.61 in refunds under a temporary ban on the use of credit information to increase consumers’ insurance premiums, according to Nevada Division of Insurance data. Regulation R087-20, which expires today, protected Nevadans from higher insurance rates due to declining credit and put money back in consumers’ pockets.
“Thanks to the Nevada Division of Insurance, many consumers avoided credit-score driven premium hikes and nearly 200,000 received refunds of penalties that insurers illegally imposed,” said Michael DeLong, Research and Advocacy Associate at the Consumer Federation of America. “The $26 million in overcharges turned over to insurance customers highlights the size of the penalty insurance companies were charging policyholders whose credit scores fell in the wake of the pandemic. Of course, many people are still dealing with less than perfect credit, and with the expiration of this temporary protection, hundreds of thousands of drivers, renters and homeowners could face new premium hikes. A permanent ban on credit information in insurance pricing would prevent that.”
The regulation was enacted in early 2021 in response to the COVID-19 pandemic and its impact on consumers; the rule temporarily prohibited insurance companies from using credit information to increase consumers’ premiums in the wake of the pandemic and retroactively going back to March 2020. For those customers who faced credit history-based price hikes before the rule took effect (which was delayed due to unsuccessful insurance industry litigation), the Division required insurers to provide them with refunds.
During the pandemic many Nevadans lost their jobs or saw drastic declines in income and struggled to pay their bills, which affected their credit information and therefore their insurance premiums. To protect consumers the Division of Insurance issued this temporary ban on credit information in insurance pricing and underwriting, and CFA testified in support of the ban and submitted a Friend of the Court brief to the Nevada Supreme Court to support the Commissioner’s regulation.
Insurance companies use numerous socio-economic factors to determine how much consumers will have to pay for coverage, with credit information often having the most significant impact on a customer’s premium. A CFA review of premium data from 2020, prior to the temporary ban on the use of credit, found that Nevadans with a perfect driving record and excellent credit paid an average annual premium of $667. But Nevada motorists with the same perfect driving record but fair credit paid an average premium of $960. Nevadans with the same driving record but poor credit paid an average premium of $1,267—a 90% increase compared to those with excellent credit.
CFA’s Michael DeLong is a member of the Nevada Division of Insurance’s Property & Casualty Insurance Advisory Committee.
Contact Information: Michael DeLong at mdelong@consumerfed.org or 925-708-1135