Why has credit (historically) been used in determining insurance rates?

Credit is traditionally used as a determining factor in many financial transactions ranging from mortgage interest rates, car loans, and even simple 0 interest loans at appliance stores. When insurance companies extend hundreds of thousands of dollars of coverage to clients, they use every piece of data they can to help determine the appropriate rate to take on that risk. Credit scoring has been used for decades in all 50 states as a rating factor with nearly every insurance company in the industry.

Why has credit (historically) been used in determining insurance rates?2021-06-08T10:11:44-07:00

Where can I learn more info?

We will be keeping our website updated with the most up to date info available: https://www.riceinsurance.com/washington-state-credit-ban-information/ You can also follow us on our social media platforms fore more updated info: LinkedIn, Facebook, and Twitter will all be updated frequently as information becomes available to us. More info on the credit ban can be found on the Insurance Commissioner’s website: https://www.insurance.wa.gov/credit-scoring-ban

Where can I learn more info?2021-06-08T09:59:41-07:00

Will the credit ban impact my life insurance rates?

No, the credit score ban only impacts personal lines insurance such as auto, home motorcycle, boat, trailer, rental home, personal umbrella, etc.

Will the credit ban impact my life insurance rates?2021-06-08T10:00:00-07:00

In real world practice, how will this credit ban impact insurance premiums?

Historically every company has filed a “neutral credit score” with the insurance commissioner. The “neutral credit score” is the score at which there are neither discounts or surcharges on a policy based on credit. Historically, any client with a credit score lower than the “neutral credit score” would receive a surcharge on their policy that increases the lower their credit score. Alternatively, any client with a credit score above the “neutral credit score” would receive discounts on their policy that increase the higher their credit score. With the new credit ban, the insurance commissioner directed all companies to rate all clients with their “neutral credit score” therefore eliminating any potential discounts and any potential surcharges due to credit. The ultimate impact of this change will vary for [...]

In real world practice, how will this credit ban impact insurance premiums?2021-06-08T10:12:30-07:00

Can I opt-in to credit scoring?

While insurance companies have lobbied the Insurance Commissioner to allow a credit score “opt-out” for those that do not want credit impacting their insurance premiums, that request was denied. As a result, credit scoring is legally banned from all insurance transactions in Washington state and clients are not able to “opt-in” to a credit score.

Can I opt-in to credit scoring?2021-06-08T10:12:52-07:00

What are the long-term implications of this credit ban?

At this point there are still a lot of unknowns. This ban was implemented in an emergency basis which is currently set to extend for 120 days. The Commissioner Kreidler has indicated an intent to extend it at least 3 years and all indications are that barring legislative action this will become a permanent change in Washington state. Normally, a ban that completely alters the rating model for insurance carriers would be implemented with years of forewarning allowing companies to adjust their rating models accordingly. Since this order was implemented on an emergency basis, Commissioner Kreidler did not allow carriers to adjust any aspect of their rating model other than to assign all clients the same “neutral credit score” therefore eliminating all credit score surcharges and discounts. [...]

What are the long-term implications of this credit ban?2021-06-08T10:13:29-07:00