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Washington State Rejects Credit-Based Insurance Scoring Ban

Source: AM Best


Posted on 19 Feb 2010

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Washington state lawmakers rejected Insurance Commissioner Mike Kreidler's bid to ban credit-based insurance scoring.

The Senate did not vote on S.B. 6252 before a key procedural deadline Feb. 16, ending hopes for passage. Supporters of the House of Representatives version of the bill, H.B. 2513, failed to muster enough votes to clear the Committee on Financial Institutions and Insurance earlier this month.

Legislators sided with industry arguments that credit-based insurance scoring is highly predictive of risk and beneficial to most consumers, said Christian Rataj, Western regional state affairs manager for the National Association of Mutual Insurance Companies. "It looks at risk of loss exposure potential. It's race and color-blind," he said.

The insurance commissioner has long opposed credit-based insurance scoring, which he said is an inherently unfair practice regardless of what insurers consider to be its actuarial value. Kreidler said he is considering his options for the present and will likely bring the bill back next year.

"We were literally just a couple of votes short. The issue won't go away," he said. "There may be a couple of things we can do to raise the profile."

Kenton Brine, assistant vice president for the Property Casualty Insurers Association of America, said the industry mounted an aggressive campaign against the credit-scoring ban. "Legislators simply considered the mountain of evidence that supports the fair and regulated use of credit scores in insurance rating -- and joined the growing list of state legislatures that have rejected credit-scoring bans over the past three years," he said in a statement.

The National Association of Insurance Commissioners' Property/Casualty committee and the Market Regulation and Consumer Affairs Committee have held joint hearings on credit-based insurance scoring in the past year and will continue to review the issue in 2010.

Concerns about the impact of job and home losses caused or exacerbated by the recession prompted the National Conference of Insurance Legislators to approve an amendment to its model law on credit-based insurance scoring that would require insurers using the practice to allow leeway for customers' "extraordinary life circumstances." Property/casualty insurers supported the amendment as a fair compromise between insurer and consumer interests (BestWire, July 12, 2009).


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