FILE - Kreidler office entrance

Washington Insurance Commissioner Mike Kreidler poses for a photo, Wednesday, Feb. 8, 2017, in his office at the Capitol in Olympia, Wash.

(The Center Square) – Washington State Insurance Commissioner Mike Kreidler has again banned the use of credit ratings in insurance pricing.

“I’m taking this action against insurers’ use of credit scoring in response to the economic harm many people have experienced during the COVID-19 pandemic—harm that has significantly impacted people who are already financially vulnerable,” said Kreidler in a statement Tuesday. “We know that now, more than ever, credit reporting is unreliable. It is unfair to base how much someone pays for frequently mandatory insurance on an unreliable and fluctuating factor like a credit score.”

The announcement marks Kreidler’s second attempt to ban credit rating through administrative rulemaking for setting prices in automotive, homeowners and renters insurance.

The first attempt, banning it by emergency rule, was shut down when Thurston County Superior Court Judge Mary Sue Wilson granted summary judgment to the insurance industry on Oct. 8, 2021.

The Office of the Insurance Commissioner (OIC) sent out the announcement minutes after a state Senate hearing about a bill, SB 5969, that could preempt Kreidler’s ability to act on this issue.

Critics and stakeholders are lining up to challenge the legal and factual basis of the new rule.

“The COVID emergency rule was an ideologically driven excuse by the insurance commissioner to impose a policy he long supported — but it’s a bad idea even as it was recently implemented,” Steven Greenhut, Western region director for the R Street Institute, told The Center Square.

He added, “Credit-based scores are one factor in determining insurance rates because they are a reliable predictor of claims. As Washington residents have already seen, banning their use increases premiums for people who have developed good credit.”

Greenhut also took issue with the insurance commissioner’s insistence that COVID-19 has generally worsened credit scores.

“The whole basis for the rule is off base,” he said. “Americans’ credit scores have actually gone up. They’ve reduced their credit-card debt and fewer people have subprime scores. There is no credit-score crisis.”

The American Property Casualty Insurance Association (APCIA) issued a statement arguing that “Commissioner Kreidler’s actions including this rule to prohibit insurers use of credit-based insurance scores will continue to throw Washington insurance market into chaos and raise rates for over one million consumers. This permanent rule is particularly harmful to seniors on fixed incomes.”

APCIA said that Kreidler adopting this rule at this time was an “unprecedented action” to “chill legislative efforts to make credit-based insurance scores work for Washington consumers.”

The insurance lobby also likely telegraphed future litigation with the government by saying that it “strongly opposes this misguided rule for a variety of legal reasons.”

In his statement announcing the new rule, Kreidler acknowledged that “some people will be upset this rule is moving forward,” particularly those who “believe they deserve a discount because of their good credit score.”

Michael DeLong, a spokesman for the Consumer Federation of America (CFA), sided with Kreidler on this issue.

“Commissioner Kreidler’s new rule is a win for consumers and for making auto insurance premiums more fair and accurate,” he said. “Your auto insurance premium should be based on your driving record, not your credit score. People have poor credit scores for a variety of reasons, such as growing up in poverty, having expensive medical bills, or losing their job due to the COVID-19 pandemic.”

Undeterred by claims from the insurance industry that setting aside credit scores has resulted in higher premiums for more than one million Washington residents, DeLong said, “This ban will help reduce costs for consumers.”

Regional Editor

Jeremy Lott is a regional editor at The Center Square overseeing the Pacific Northwest. Lott previously worked as an editor for a number of publications and founded three of the Real Clear Politics family of websites.