Bill aims to stop use of credit history to set home insurance rates

Bill aims to stop use of credit history to set home insurance rates

Insurance companies insist that how we pay bills and manage credit is one valid predictor of how likely we'll be to file a claim against our homeowners insurance. It's known as insurance credit scoring. Insurance Commissioner Mike Kreidler wants the practice stopped. 

Check out TVW online and you'll see who showed up to support -- or block --  House Bill 1212 at a January 30th hearing in Olympia.  HB1212 would prohibit insurance companies from using credit information to deny or set rates for homeowners insurance. The insurance lobby is lined up in opposition.

"There's only one state in the country that statutorily bans the use of insurance scoring in one line of insurance or another," said Kenton Brine with the Property Casualty Insurance Association of America.

"We feel pretty strongly that the use of this tool actually does allow for fairness in the pricing of homeowners insurance as well as automobile insurance," added Jean Leonard, who represents State Farm and Nationwide Insurance.

"Farmers Insurance is in strong opposition of House Bill 1212 because it is going to take our entire underwriting system in terms of how we derive our rating models, and turn it on its head," explained Jessica Harbin, a lobbyist for Farmers Insurance.

But Kreidler says thousands of homeowners have contacted his office to complain about premiums being raised for "unfair" credit reasons, such as consolidated credit, self-canceled credit cards, a major credit purchase using deferred interest, getting a new credit card for frequent flyer miles, or not having enough active accounts.

"Why should something like credit be used that way?" Kreidler asked.

Past efforts to change existing  law regarding insurance credit scoring have died to partisan opposition. But supporters say a key difference this year might change things, because the bill's sponsor, Rep.Cary Condotta of Wenatchee, is a Republican.

"As a person's credit rating changes, does it really increase the likelihood that their house is going to burn down, or there's going to be a liability issue?  I really seriously doubt that,"  Condotta said.

For the first time, the move to prohibit  use of credit history in setting certain insurance premium has bi-partisan support.  In order to move forward,  HB1212 must be voted out of the House Business and Financial Services Committee by February 22nd.