Frequently Asked Questions

March 22, 2021

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.

Moving forward, we expect insurance companies to work to adjust their rating models in other ways but unfortunately major changes like this can months or years to fully realize and implement. In the short term, we expect insurance carriers to get much more picky about things they can see and control. On auto insurance that means that driving violations and accidents are likely to more quickly result in adverse action taken by insurance carriers. As rating models adjust to this change we expect surcharges for violations and accidents to significantly increase to offset the loss of credit as a rating factor. On home insurance, we expect condition of home to be weighted much heavier than in the past. Older roofs, peeling paint, and any visible lack of “pride of ownership” are much more likely to result in a cancellation or declination by insurance carriers.

Many auto insurance carriers offer optional telematics apps that can be installed on phones or devices installed in vehicles that can track actual driving habits of insured drivers and result in more personalized discounts. These programs will be one way to add additional discounts to your policy if your carrier offers such a program.

Ultimately we still don’t know how long this ban will last nor how quickly insurance companies will be able to adjust their rating models to this change. We are committed as always to helping our clients navigate this changing insurance environment in a way that is best suited for each individual.

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.

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 each individual based off their credit score and also vary by each company as different company’s will have a different “neutral credit score” used with their rating model.

According to Commissioner Kreidler’s press release: Commissioner Kreidler believes credit scoring is unfair. Insurers say that credit or insurance scores are blind to race or income, but he believes the practice has a disparate impact on people with lower incomes and communities of color.

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.

We sincerely hope not. That number has been thrown out by a number of different insurance carriers as a worst case scenario, presumably for their clients with the highest credit scores. To put it another way, at least a couple companies give up to 80% discounts for the high credit scores which means for those clients, rates would increase by 80% once their credit score discount is removed from their policy. With that said, very few clients are getting maximum credit score discounts or maximum credit score surcharges. All clients in Washington state will be impacted in some way by this credit score ban but that impact could vary from a significant reduction in rates, basically no change at all, or a significant increase in rates. The better your credit score, the greater the potential impact, the lower your credit score the greater the potential benefit. Unfortunately, we won’t know how our clients’ rates will be directly impacted until their insurance renewal is processed post 6/20/21.

This credit ban was implemented with short term notice as an emergency order. The emergency order currently lasts for 120 days and the Insurance Commissioner is trying to extend the order for 3 years. All indications are that the intent is for this credit ban to be a permanent change in Washington state. Please keep in mind that the Insurance Commissioner is an elected official in Washington state. We encourage you to share any feedback with your State Senator here or with the Insurance Commissioner’s office here.

No, flood insurance policies do not use credit as a rating factor.

No, earthquake insurance policies do not use credit as a rating factor.

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

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

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

We don’t know. We the insurance agent have never been able to actually see your credit score when quoting insurance. We know that credit is a rating factor that can either decrease rates for clients based off credit score discounts or increase rates for clients based on credit score surcharges but we have no way of knowing to what extent each client is impacted. Credit score discounts/surcharges are different for each client and vary greatly amongst insurance carriers. What we do know is that that Washington state law now dictates that all insurance companies remove all credit related discounts/surcharges from their rating model. So if your policy is one that was being surcharged due to your credit score, your insurance premiums will improve. If your policy is one that was being discounted based off your credit score, your insurance premiums will increase. We have no way of knowing the extent of that decrease/increase until your insurance renewal is processed post 6/20/21.

Please rest assured that we are working with all our insurance carriers to determine how to best help our clients navigate this policy change and will be working directly with any adversely impacted clients at the time of their renewal to help them in any way that we are able offset potential cost increases.

This ban is specific to Washington state policies only.

Not unless you are starting a brand new insurance policy on 6/20/21. For renewal policies, rates will begin to be impacted by the credit score ban for policies processed on or after 6/20/21. Different companies process renewals on different timelines anywhere from 30 to 60 days in advance. So the earliest renewal policies to be impacted by the ban will be policies renewing on 7/20/21 or later. A good rule of thumb is if you received your policy renews prior to 6/20/21, then the credit ban is not yet impacting your rates. If you receive your renewal paperwork after 6/20/21 then the credit ban is likely impacting your rates.