Washington State Issues Emergency Insurance Regulations Barring Price Discrimination on Credit Score

On March 23rd, 2021, U.S. News & World Report reported that the Washington State Insurance Commissioner Mike Kreidler has announced a new emergency rule barring insurance companies from using credit scores to set insurance rates for personal property coverage for three years after the COVID-19 pandemic ends. In this article, our Spokane insurance lawyers discuss three key things you should know about Washington State’s new emergency insurance regulations.

The CARES Act Places a Temporary Hold on Certain Negative Credit Reports

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed into law in the Spring of 2020 to help provide financial protection and support to people, families, and businesses affected by the COVID-19 pandemic. Among other things, the CARES Act put temporary restrictions on the reporting and use of certain negative credit information.

In effect, that law kept insurance companies from charging higher prices to certain consumers based on negative credit information. Unfortunately, this means that some lower income people are actually forced to pay higher prices for the same level of insurance coverage as economically-secure people who have a stronger credit history.

The Protections Will Expire Once the President Declares an End to the Emergency

With the recent increase in vaccine supply and the decline in COVID-19 cases, there is some optimism that the public health crisis may be gradually improving. The credit-related provisions of the CARES Act will automatically expire 120 days after the President of the United States declares the end to the pandemic. While there is still no reason to believe that such a move is imminent, there is a chance that it could happen later in 2021 or early in 2022.

Washington Emergency Rule Will Ban Credit-Based Pricing for an Additional Three Years

With recognition that the CARES Act credit protections will eventually expire, Washington State Insurance Commissioner Mike Kreidler has put an emergency rule in place that bars insurers from using credit scores as the basis for discriminatory pricing for personal property-related coverage. The emergency state regulation affects several different types of insurance coverage, including:

• Motor vehicle insurance coverage;
• Renters’ insurance coverage; and
• Homeowners’ insurance coverage.

Notably, several state officials wanted to pass a permanent ban on an insurance company’s use of credit reports to offer different rates to customers. For the time being, that proposal has stalled out in the state legislature. However, for at least the next three years, Washington State law prohibits insurers from using credit-related price discrimination for personal property policies. The new insurance regulation is effective immediately.

Was Your Insurance Claim Denied in Eastern Washington?

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From our Spokane legal office, our insurance lawyers represent policyholders and beneficiaries throughout Eastern Washington, including in Spokane County, Grant County, Ferry County, and Adams County.