As the letters to the editor section of The Columbian has detailed, many Washington residents have been surprised in recent months by sharp increases to premiums for their auto or home insurance.
Those increases largely are the result of action by state Insurance Commissioner Mike Kreidler, who forbade insurance companies from considering a customer's credit score in determining rates. While Kreidler's decision might have merit, such a sweeping change should be the decision of the Legislature rather than a unilateral action.
Alas, the issue has been complicated by Kreidler's approach.
Last year, the insurance commissioner — a Democrat who was elected to a sixth term in 2020 with 65 percent of the vote — asked lawmakers to prohibit the use of credit scores in determining premiums. "What does a credit score have to do with how you — whether a senior citizen or young adult — drive your car or treat your property?" he asked in an opinion piece for The Seattle Times. Other statements drove home the point: "Credit scores do not cause accidents" and "insurers could use dozens of other more reliable risk factors to determine your premiums."
When the Legislature declined to take action, Kreidler issued an emergency order banning the use of credit scores, arguing that the economic downturn caused by the COVID-19 pandemic had played havoc with people's credit.
That decision was overruled by a Thurston County judge in October; by then, many customers had renewed their policies with higher premiums. Kreidler said at the time, "I will continue the fight to permanently ban credit scoring and will be considering my options."
The meaning of that statement became clear last week. Kreidler issued another mandate, scheduled to take effect March 4, and insurer groups quickly filed suit to prevent it. "The Commissioner's extreme action exceeds his authority, bypasses the Legislature, and robs consumers of the benefits of a highly competitive private market," said Claire Howard, senior vice president of the American Property Casualty Insurance Association.
Kreidler's action might or might not be legal; that is up to the courts to decide. But it is not unique. California bans consideration of credit scores thanks to a ballot measure passed in 1988. Massachusetts also prohibits the process, and two other states prevent the use of credit scores for either auto insurance or home insurance, but not both.
Kreidler has argued that the use of credit scores unfairly results in higher rates for low-income demographics.
Insurance representatives counter by saying there is a correlation between credit scores and the likelihood of filing a claim — a correlation strong enough to warrant consideration of credit scores in setting rates.
Regardless of the merits of Kreidler's argument, the decision should not be his alone to make. When a decision impacts the premiums of millions of policy holders in Washington, the Legislature must be involved. If Kreidler cannot effectively make his case to lawmakers and convince them that the use of credit ratings is inherently unfair, his only viable option is to try again.
Kreidler's latest decision is scheduled to be in place for three years following the end of pandemic-related federal and state emergency financial protections. Meanwhile, he says he will continue to push the Legislature for a permanent ban on the use of credit scores. That, in truth, should have been his strategy all along.