One group hopes to prevent a statewide ban on the use of credit cards to determine insurance rates. (Pexels)
An insurance industry group is suing to break the state’s ban on using consumer credit scores to help determine auto, home and renter insurance rates.
State insurance commissioner Mike Kreidler recently approved an emergency order banning the practice, which he says unjustly raises rates for minorities and the poor.
The American Property Casualty Insurance Association filed a lawsuit on Wednesday at the Superior Court in Thurston County, which seeks to prevent the order from taking effect on new and renewed policies on June 20, 2021.
“The Commissioner’s extreme action exceeds his authority, ignores the legislature and robs consumers of the benefits of a highly competitive private market,” said APCIA senior vice president Claire Howard in a written statement.
“I am frankly surprised,” Kreidler told KIRO Radio in response to the lawsuit. “The main duty and responsibility of this office is to protect insurance policy holders.”
He says that many faced financial difficulties during the pandemic and, if it hasn’t yet appeared in their credit scores, it will end when government protections put in place during the pandemic are over.
“People who haven’t been able to pay their mortgages and things like that – it’s still going to come back at some point and be part of their financial records and work against them,” Kreidler said.
APCIA says that without being able to consider credit, rates will increase for many more consumers.
“Without these tools, insurance rates could rise for more than a million Washington residents who are already struggling to pay their bills during the pandemic recession of COVID-19,” said Howard, adding that in addition to insurance scores based on in credit, many factors determine what consumers pay, “but not race or income”.
In a 2015 report, the Consumer Federation of America found that zip codes with predominantly black residents faced premiums 60% higher than zip codes predominantly white.
“(Insurance) companies will insist that they never ask a customer to run, but if they are serious about confronting systemic racism, it’s time to recognize that their pricing tools use racing proxies that make auto insurance required by more expensive government for black Americans, ”said CFA insurance expert Doug Heller.