Commissioner seeks ban credit-based insurance rates
OLYMPIA, Wash. -- The state insurance commissioner is taking on what he calls discrimination in how your insurance rates are set.
Mike Kreidler is pushing for a ban on the use of credit information in determining insurance rates.
No matter how clean your driving record, the information in your credit report can raise your insurance rates or get you a break.
Insurers have been using credit information for nearly a decade. KOMO News was the first to expose the practice in the 90s.
Jim Arthur didn't know that until he opened a store credit account to save 10 percent on new furniture. As far as his insurance company was concerned, that new account threw his credit down in the dumps.
Arthur got a notice in the mail explaining his insurance company would be using credit information to set rates. The lower the credit score, the higher the premiums would be. Arthur's annual premium jumped about $150.
"Between the two of us, we had a lot of years of driving with no accidents, but we bought a mattress." said Arthur.
Kreidler is on the warpath.
"What's it have to do with how I drive my car, or how I maintain my home?" said Kreidler. "It doesn't have anything to do with that!"
Kreidler says existing legislation passed eight years ago aimed at setting guidelines for the insurance industry is not working.
"They go in there and they pull out certain factors out of your credit score, which you don't even know what it is, use it in different algorithms, and they say, 'We can't give you the best rate,'" he said.
Kreidler says his office has received thousands of complaints from consumers who consolidated credit cards and lowered their credit limits, canceled credit cards, purchased big-ticket merchandise with 12 months deferred interest, or people who do not have enough active credit or bank accounts.
"You've got people who've lost their jobs. Their credit ratings have been affected. Insurance companies should be embarrassed to be using this kind of procedure, because it is blatantly unfair," he said. "What I'm going to do now is go back and try to ban the use of this credit information."
House Bill 2513 would make it illegal to use consumer credit history in any manner when determining insurance, rates, or eligibility. There's a similar bill in the state Senate.
But insurance companies insist your credit history should be linked to your insurance rate. According to Karl Newman of the Northwest Insurance Council, credit-based insurance scoring has been repeatedly proven to be one of the most accurate predictors of future claims.
"The lower credit score is correlated directly to a higher propensity to file claims," he said. "It doesn't mean that you will file a claim, but those people in that segment have a higher rate of filing future claims."
Newman says Washington already has one of the most restrictive laws in the country regarding how insurance companies use credit information.
"This bill that's being considered now could cause rates to raise for as many as 70% of the people in the state of Washington," Newman said.
A public hearing will be held on HB 2513 on Wednesday, Jan. 20 at 6 p.m. at the John L. O'Brien Building in Olympia.
For more information
HB 2513
Public hearing 6pm, Wednesday, January 20th, John L. O'Brien Building in Olympia.
SB 6252
Insurance commissioner's view of credit-based insurance scoring
http://www.nwinsurance.org/credit-insurance%20brochure.pdf
Contacting your legislators
Mike Kreidler is pushing for a ban on the use of credit information in determining insurance rates.
No matter how clean your driving record, the information in your credit report can raise your insurance rates or get you a break.
Insurers have been using credit information for nearly a decade. KOMO News was the first to expose the practice in the 90s.
Jim Arthur didn't know that until he opened a store credit account to save 10 percent on new furniture. As far as his insurance company was concerned, that new account threw his credit down in the dumps.
Arthur got a notice in the mail explaining his insurance company would be using credit information to set rates. The lower the credit score, the higher the premiums would be. Arthur's annual premium jumped about $150.
"Between the two of us, we had a lot of years of driving with no accidents, but we bought a mattress." said Arthur.
Kreidler is on the warpath.
"What's it have to do with how I drive my car, or how I maintain my home?" said Kreidler. "It doesn't have anything to do with that!"
Kreidler says existing legislation passed eight years ago aimed at setting guidelines for the insurance industry is not working.
"They go in there and they pull out certain factors out of your credit score, which you don't even know what it is, use it in different algorithms, and they say, 'We can't give you the best rate,'" he said.
Kreidler says his office has received thousands of complaints from consumers who consolidated credit cards and lowered their credit limits, canceled credit cards, purchased big-ticket merchandise with 12 months deferred interest, or people who do not have enough active credit or bank accounts.
"You've got people who've lost their jobs. Their credit ratings have been affected. Insurance companies should be embarrassed to be using this kind of procedure, because it is blatantly unfair," he said. "What I'm going to do now is go back and try to ban the use of this credit information."
House Bill 2513 would make it illegal to use consumer credit history in any manner when determining insurance, rates, or eligibility. There's a similar bill in the state Senate.
But insurance companies insist your credit history should be linked to your insurance rate. According to Karl Newman of the Northwest Insurance Council, credit-based insurance scoring has been repeatedly proven to be one of the most accurate predictors of future claims.
"The lower credit score is correlated directly to a higher propensity to file claims," he said. "It doesn't mean that you will file a claim, but those people in that segment have a higher rate of filing future claims."
Newman says Washington already has one of the most restrictive laws in the country regarding how insurance companies use credit information.
"This bill that's being considered now could cause rates to raise for as many as 70% of the people in the state of Washington," Newman said.
A public hearing will be held on HB 2513 on Wednesday, Jan. 20 at 6 p.m. at the John L. O'Brien Building in Olympia.
For more information
HB 2513
Public hearing 6pm, Wednesday, January 20th, John L. O'Brien Building in Olympia.
SB 6252
Insurance commissioner's view of credit-based insurance scoring
http://www.nwinsurance.org/credit-insurance%20brochure.pdf
Contacting your legislators