A bill in Washington to prohibit insurers from using consumer credit scores to determine auto and home owner insurance premiums was overturned by an amendment from the insurance industry in the Senate Business, Financial Services & Trade Committee on Feb. 15.
Senate Law 5010, backed by insurance commissioner Mike Kreidler, would limit the use of consumer credit history for a period of three years and ensure that insurance does not become more unaffordable for people facing financial challenges as a result of the pandemic.
The bill has been amended and placed on second reading by the Rules Committee.
For a long time, Kreidler has called insurers' use of creditworthiness unfair and has requested a ban twice, first in 2001 and later in 2010.
As consumers grapple with the economic fallout from the coronavirus pandemic, he has called a credit scoring ban critical because he says many people will suffer financially in the years to come.
"Again, the insurance industry is showing its strength in Olympia," Kreidler said in a statement. “At a time when they are bringing in billions in virus-driven profits, they are working against the policyholders they claim to protect. Given the economic danger so many face and our country's confrontation with the failure of racial justice, I would have hoped that we would see everyone committed to a solution that puts the consumer first. "
He said the amended insurance industry legislation does not provide long-term protection for consumers who are harmed by insurers' use of credit scores. "
Mark Sektnan, vice president of the American Property Casualty Insurance Association, said most people save money when credit is used.
Most people save money when using credit to assess how much you pay for insurance. Therefore, lawmakers recognized that it was not the time to weigh on the burdens of families already struggling to make ends meet during the COVID-19 recession, "Sektnan said.
Referring to a recent poll that found 55% of Washington residents save money on their auto insurance when credit is used to assess how much they pay, he said the amended bill is a compromise.
"Insurers want to help make insurance more affordable," he said. “COVID-19 forces families to make painful decisions about budgets, such as choosing between drugs, groceries, or insurance. Families need extra help when the unthinkable happens, such as the death of a spouse, the loss of a job, or even a pandemic. "
Kreidler argues that the replacement bill would limit the exemption and even allow the short-term aid to expire quickly.
The industry change only applies to policies that are renewing, meaning all new property insurance will be priced based on consumers' existing credit scores.
“This insurance industry designed this bill to ensure that you stick with your current business,” added Kreidler. "That's a great incentive for the industry and a bad deal for consumers. Creditworthiness is an insidious tool in the industry that has for too long subsidized the well-to-do at the expense of punishing low-income people and many people of color." the insurance industry maintains this inequality, I do not support this watered-down bill and am committed to ensuring that we get a complete ban in our state.
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