State Regulation

Washington Commissioner Kreidler’s Proposed Ban on Insurance Credit Scoring Critical to Preventing Unfair Pricing in Wake of Pandemic

Consumer Federation of America Calls for Quick Implementation of Three- Year Moratorium That Will Protect Vulnerable Consumers

Washington D.C. — Consumer Federation of America (CFA) urged the Washington State Office of the Insurance Commissioner to move forward with their proposed temporary ban on credit history’s use in insurance pricing. In comments submitted to the office, CFA wrote that this ban “is necessary to address the unfair discrimination created by the impact of the pandemic and related public policy responses on consumer credit histories, as well as the pandemic’s exacerbation of racial and ethnic disparities caused by the use of credit history in insurance underwriting, pricing, and other practices.”

“The unfairness of using credit history to determine insurance prices was not only made worse by the pandemic, it became incoherent as some people were able to use pandemic rules to prevent credit scores from falling while others with the same credit history saw their credit fall and their premiums rise,” said Douglas Heller, CFA’s Insurance Expert. “Because of systemic biases that were amplified by the pandemic, the insurance problems that will persist without Commissioner Kreidler’s proposed rule will hit communities of color the hardest. These protections should be implemented as soon as possible.”

In its letter, CFA explained that, whether or not one thinks credit scoring is valid in normal times, in the wake of a pandemic credit-based insurance scoring violates Washington’s insurance laws. The group said that without the rules many consumers will face massive premium increases or coverage denials in the coming months and years. According to premium data acquired by CFA from Quadrant Information Services, when auto insurance companies have used credit scoring to set premiums for Washington drivers, drivers with perfect driving records but poor credit see premiums rise by 79% on average and by as much as 185%.

The table below shows the average statewide premiums for basic auto insurance coverage of ten Washington insurers based on policyholders’ credit history.

“By enacting this three-year ban, Washington State will make the insurance market fairer for consumers who may have faced major financial challenges because of the pandemic, but didn’t suddenly become reckless drivers or unsafe,” said Michael DeLong, a Research and Advocacy Associate with CFA. “Your auto insurance premium should be based on your driving record, not your credit history after a once in a century pandemic. The proposal will protect drivers, homeowners, and renters from unfair insurance prices, and we hope other states will follow in Washington’s footsteps.”

Michael DeLong, 925-708-1135
Doug Heller, 310-480-4170