Washington state Insurance Commissioner Mike Kreidler’s adoption this week of a rule prohibiting insurers from using credit scoring to set rates for auto, homeowner and renter insurance has already drawn a legal challenge from insurer groups.

Washington Insurance Commissioner Mike Kreidler wants to ban the use of credit-based insurance scoring. He says it discriminates against low-income people and people of color. But the proposal faces stiff opposition in the Legislature.

Washington Insurance Commissioner Mike Kreidler wants to ban the use of credit-based insurance scoring. He says it discriminates against low-income people and people of color. But the proposal faces stiff opposition in the Legislature.

Courtesy of the office of the Washington insurance commissioner

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The American Property Casualty Insurance Association, the Professional Insurance Agents of Washington, and the Independent Insurance Agents and Brokers of Washington on Wednesday jointly filed two legal actions — an administrative challenge and a superior court lawsuit — seeking to stop the rule, which is set to take effect March 4 and last for three years after the end of pandemic-related federal and state emergency financial protections, whichever is longer.

“The Commissioner’s extreme action exceeds his authority, bypasses the legislature, and robs consumers of the benefits of a highly competitive private market," Claire Howard, senior vice president of the American Property Casualty Insurance Association, said in a written statement Thursday.

Kreidler’s office started the process of implementing the permanent rule — announced Tuesday — after an emergency rule the commissioner issued last year was struck down by a court, which found there was no justification to bypass normal rulemaking procedures.

Kreidler spokeswoman Stephanie Marquis said in an email that the office believes “this rule is within the Commissioner’s statutory authority to adopt and is the best option for Washington consumers.”

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Kreidler said he’s also proposing a new rule that would require insurers to provide policyholders with a written explanation for any premium change.

He said that once federal pandemic protections end, people who have struggled financially over the past two years are at risk of have delinquencies show up on their credit reports, and noted that insurers charge good drivers with low credit scores nearly 80% more for mandatory auto insurance.

Republicans and insurers have decried the move, saying that it will add costs to people on fixed incomes, like the elderly, who have benefited from reduced insurance rates because of their good credit scores.

“Commissioner Kreidler’s rule to prohibit insurers use of credit-based insurance scores will continue to throw the Washington insurance market into chaos and raise rates for over one million consumers,” Howard wrote.

Gov. Jay Inslee said that he supported the insurance commissioner’s effort.

“I just don’t think it’s fair to good drivers to punish them if they’ve had some credit difficulty,” he said at his weekly news conference with Capitol reporters.

Two other states don’t allow credit scoring for both homeowners and auto insurance rates: California, which passed a ballot measure in 1988, and Massachusetts. Maryland allows credit scoring to determine rates on auto insurance, but not homeowners, and Hawaii allows credit scoring for homeowner’s insurance but not auto.

Kreidler has said that he plans to use the time while the ban is in effect to work with the Legislature, consumer groups and the insurance industry in an effort to permanently end the use of credit scoring in setting insurance premiums.

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Washington insurance commissioner adopts credit scoring ban

Washington state Insurance Commissioner Mike Kreidler has adopted a rule prohibiting insurers from using credit scoring to set rates for auto, homeowner and renter insurance for three years after the end of pandemic-related federal and state emergency declarations on the issue, whichever is longer