Debate over insurance credit scoring underway in Washington
Washington is the latest state to consider a ban against the controversial practice of using credit scores to determine insurance rates, with a legislative hearing held this week on the proposal.
An announcement from Washington Insurance Commissioner Mike Kreidler expressed support for ending the practice in the state, pointing out that some people have seen their premiums increase simply because they closed accounts or took other basic financial steps. Kreidler also noted that some insurance companies have even begun taking a person’s educational level into account when setting rates.
“Thousands of consumers have contacted my office over the last several years complaining about their insurance company’s use of credit scoring. They say, ‘I pay my bills on time, I pay my premium, have never filed a claim or had a ticket – why is my premium going up?’” said Kreidler.
The debate is reminiscent of one currently pending before the Michigan Supreme Court, with state insurance officials also trying to do away with the practice.
Insurance companies defend credit scoring by arguing that those with lower scores are statistically more likely to file claims over time.
In Michigan, opponents of insurance credit scoring noted that a person with a DUI conviction on their record can actually end up paying less for auto insurance than a person who has missed a few payments on a mortgage or credit card.
The recession has also brought to light the fact that a growing number of employers have been using credit scores as part of their hiring decisions, especially for jobs in the financial sector.
With these things in mind, keeping up with monthly payments and not using too much of one’s available credit may be more important than ever.
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Tags: Insurance