Judge Rules Against Washington State’s Ban On Use Of Credit Scoring

A Washington state Superior Court judge granted a narrow ruling Friday in favor of the insurance industry’s argument against Insurance Commissioner Mike Kreidler’s emergency rule temporarily banning the insurers’ use of credit scoring.

Kreidler issued the following statement in response to the ruling:

“I’m disappointed by today’s ruling. I have authority to take continuing action to protect consumers from the insurance industry’s unjust, secretive and unrealistic method to determine what consumers pay to insure their vehicles and homes.

It’s way past time for the industry to apply reliable and fairer factors to determine premiums. There are better ways to maintain their profits than relying on this outdated practice that depends on people struggling with their credit scores.

I will continue the fight to permanently ban credit scoring and will be considering my options.”

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Kreidler issued the three-year ban in March, citing the state and national state of emergency declarations allowing governments to mitigate financial impact of the COVID-19 pandemic. The pandemic is affecting credit scores and that in turn adversely affects insurance rates, particularly for low-income residents and people of color.

Washington ordered insurers to submit new property and casualty rates to comply with the ban on June 20. The move followed the rejection of an injunction filed on April 9 by a coalition of insurance groups led by the American Property Casualty Insurance Association.

The APCIA group argued that credit scores are only one element of the metric used to price insurance, adding that banning credit scores would adversely affect many Washington consumers.

“Insurance scores are not credit scores like the ones used by banks to offer loans or credit cards,” APCIA said in a release. “Insurers use specific information about how consumers use credit as one factor to give consumers the most affordable and accurate rate."

Kreidler sent a letter to his colleagues at the National Association of Insurance Commissioners urging all states to abandon using credit scores for setting insurance rates.

Along with Washington, California, Hawaii, Maryland, Michigan and Massachusetts ban or limit insurance companies’ use of credit scores to rate policies, according to the Washington Department of Insurance.