January 12, 2021
OLYMPIA, Wash. – As the elected insurance commissioner for Washington state for two decades, Mike Kreidler has continued to call out the unfairness of insurers’ use of credit scoring and has requested a ban twice, first in 2001 and later in 2010 during the economic recession.
Now, as consumers struggle with the economic fallout of the coronavirus pandemic, he believes banning credit scoring for insurance is critical.
His proposal, Senate Bill 5010, is joint request legislation with Gov. Jay Inslee and will be heard at 8 a.m. on Jan. 14 before the Senate Business, Financial Services & Trade Committee.
Kreidler cites a new report from the Consumer Federation of America showing how insurers on average charge safe drivers in Washington 79% more due to low credit scores.
“People are struggling in ways we’ve never imagined,” said Kreidler. “We’re facing record unemployment and people are struggling to pay their bills, including their insurance premium. Insurers have relied on credit scores for too long to determine your premium. But I continue to hear stories from people across Washington who’ve been hit with rate increases they don’t understand. Even their agents can’t explain it to them, other than to say it’s their credit score.
“Meanwhile, insurers continue to rely on these secret scores or formulas to shed consumers they’ve determined are undesirable.”
The Consumer Federation of America analysis details how the top insurers in Washington use credit scores to penalize good drivers in every part of the state. Safe drivers with anything less than excellent credit pay more for mandatory auto insurance than if they had better credit scores, according to the report.
Average premium by credit score for a 35-year old excellent driver
Source: Quadrant Information Services, LLC as reported by the Consumer Federation of America
Kreidler added, “Credit scoring is discriminatory and unjustly targets people of color, those with lower incomes and individuals and businesses struggling during the coronavirus pandemic. The insurance industry claims that people with lower credit scores are more likely to file claims in the future. I believe it’s inherently abhorrent, unfair and unjust. There’s plenty of more reliable information an insurer can use to determine your premium.”