Washington Insurance Commissioner Mike Kreidler recently issued a temporary emergency order that bans insurers from using credit scores to determine premiums, rates or eligibility for personal property insurance.
The emergency order—which applies to auto, renters and homeowners insurance—takes effect immediately and impacts all new policies as well as existing policies processed for renewal on or after June 20, 2021.
The order will remain in effect for three years after the day the COVID-19 national emergency is declared over, or the day Washington’s COVID-19 state of emergency expires, whichever is later.
According to a news release from the Washington State Office of the Insurance Commissioner, the emergency order was put in place to prevent discriminatory pricing in auto, renters, and homeowners insurance once the federal Coronavirus Aid, Relief and Economic Security (CARES) Act expires.
“The insurance industry’s dependency on the discriminatory practice of credit scoring has always been unfair,” Kreidler said. “But given that the federal protections from plummeting credit scores could end soon, we need to take action now to protect the public.”
The CARES Act placed a temporary hold on the reporting of certain negative credit information. Because of this, Kreidler contends that the credit histories that are being collected are inaccurate for some consumers, potentially leading to unreliable credit scores and discriminatory pricing.
The full text of the emergency rule can be found here.
© 2021 Zywave, Inc. All rights reserved.