Consumers Federation advocates urge court to protect Washington state’s temporary ban on using credit history in insurance pricing

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WASHINGTON, June 24 (TNSpol) — The Consumers Federation of America issued the following press release:

Thurston County Superior Court should maintain state regulations that temporarily prohibit the use of credit history in insurance pricing, according to a “Friend of the Court” (amicus) brief submitted to Thurston County Superior Court speak Consumers Federation of America (CIF), Northwest Justice Project (NPC) and North West Consumer Law Center (NCCL). The settlement before the Court is necessary to address the growing credit history crisis faced by financially vulnerable Washingtonians in the wake of the pandemic. It was issued by the Office of the Insurance Commissioner earlier this year and is being challenged by the insurance industry (APCIA, et al v. washington state, Thurston County Superior Court 22-2-00180-34).

“As the economic pain of the pandemic begins to show on consumers’ credit scores, it is essential that the Insurance Commissioner’s consumer protection rules come into effect.” said Doug Hellerdirector of insurance for Consumers Federation of America. “So many careful drivers and responsible homeowners and renters are facing insurance premium hikes simply because the pandemic has taken a toll on their finances and credit. It’s not fair, and as pointed out quite rightly Commissioner, it’s illegal under Washington law, which is why the Court must uphold these rules and put an end to the obstructionism of the insurance industry.”

The commissioner’s rule temporarily prevents insurance companies from using customers’ credit histories when setting insurance premiums, given the impact the pandemic will have on customers’ credit histories. Washington residents, especially as aid programs and credit protection rules put in place during the pandemic expire. Because the pandemic has disproportionately harmed communities of color and low-income consumers, the use of credit scores at this time will illegally amplify unfair discrimination in state insurance markets.

“This temporary ban on using credit history to determine rates for private passenger auto coverage, renter coverage and homeowner coverage is necessary to address unfair discrimination caused by the impact of the pandemic. and related public policy responses on consumer credit history, as well as the pandemic’s amplification of racial disparities caused by the use of credit history in underwriting, pricing and other insurance practices “, explained the groups.

The brief details why making such a rule falls within the commissioner’s authority, granted by state law that prohibits unfair discrimination in insurance markets. The brief also explains that legal service organizations, such as the Northwest Justice Project situated at Seattleface a growing number of personal bankruptcies and credit write-downs as a direct result of the financial devastation wrought by the pandemic.

As an example of this growing crisis, Northwest Justice Project shared the story of a single mother, Jane Doe 1 (JD1), who lost her job in the spring of 2020 due to pandemic-related closings and saw her credit rating drop because she had to prioritize payments. In the filing, they reported: “Almost immediately, she noticed that her score had dropped by 74 points. Within a month, she received a notice from her car insurance company that her monthly rate had increased by approximately 43 % compared to $70 per month to $130. JD1 has never made a claim against a car insurance policy and has a good driving record… For JD1, who already budgets to pennies every month, the rising cost of car insurance remains a financial challenge important.”

In washington state, auto insurers have historically used consumers’ credit histories to charge higher premiums to low-credit drivers, even when they had perfect lifetime driving histories. CFA’s analysis of premium data charged by ten major auto insurers in every state zip code shows that consumers with excellent credit-based insurance scores and perfect driving records pay an annual premium average of $468. But if those same consumers have fair credit, their average annual premium increases to $633-at 35% or $165 increase. If, instead, these drivers with clean records have bad credit, their average annual premium rises to $838-a 79% or $370 increase compared to consumers with excellent credit.

A hearing in the case – no. 22-2-00180-34 – is scheduled for July 8, 2022 in Thurston County Superior Court.

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See the court filing here: https://consumerfed.org/press_release/consumer-advocates-urge-court-to-protect-washington-states-temporary-ban-on-use-of-credit-history-in-insurance -pricing /

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Original text here: https://consumerfed.org/press_release/consumer-advocates-urge-court-to-protect-washington-states-temporary-ban-on-use-of-credit-history-in-insurance-pricing/

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