The American Property Casualty Insurance Association is suing to end contingency schemes recently filed by Washington Insurance Commissioner Mike Kreidler to ban the use of credit-based insurance ratings in insurance rating and underwriting.
A petition for declaratory and interim relief was filed today with the Superior Court in Thurston County, which is asking the court to invalidate the commissioner's action and order its enforcement.
The action is designed to prevent Kreidler from acting outside of his jurisdiction and requires him to comply with existing statutes governing the insurance industry's use of credit-based insurance scores, among other statutes, according to the APCIA.
"Commissioner Kreidler is seeking to ban a major risk-based assessment tool that has been used for the benefit of consumers for nearly 20 years," Claire Howard, APCIA senior vice president, general counsel and corporate secretary, said in a statement. "The commissioner is trying to get around Washington's legislature by taking an action that the legislature has recently explicitly rejected."
Kreidler recently issued an emergency injunction last month prohibiting insurers from using a consumer's credit score to determine coverage for cars, renters and homeowners. He's been working on cutting credit scores out of insurers' considerations for a while now. His most recent effort failed when a bill he supported, Senate Law 5010, was overturned by an insurance industry change in the Senate Committee on Business, Financial Services and Commerce on Feb. 15.
Consumer Reports at the time applauded Kriedler, arguing that using credit scores to set insurance rates unfairly discriminates against lower-income consumers and has a disproportionately negative impact on communities of color.
"It's fundamentally unfair to penalize consumers with higher insurance rates just because they have a less-than-excellent credit score," Chuck Bell, advocacy program director for Consumer Reports, said in a statement. "Your credit has nothing to do with whether you are a responsible driver, renter or home owner and should not affect the amount you pay to insure your property."
According to APCIA, Kreidler's actions will harm more than a million insurance consumers in Washington, who today pay less for auto, home, and renter insurance due to the use of credit-based insurance scores to effectively predict risk and establish accurate rates. set.
"Most consumers save money when credit-based insurance scores are used to assess how much they pay for insurance," Howard said. “Insurance scores are not credit scores like those used by banks to offer loans or credit cards. Insurers use specific information about how consumers use credit as a factor in providing consumers with the most affordable and accurate rate. Many other factors affect the amount you pay for insurance, but not your race or income. Without these tools, insurance rates could soar for more than a million Washingtonians already struggling to pay bills during the COVID-19 pandemic recession. "
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