Loyalty to your insurance company is costing you money. Now is the time to shop.

The insurance commissioner’s emergency rule temporarily banning insurers’ use of credit information took effect on June 20, 2021, and the formal rule-making process is underway. The ban applies to all private auto, homeowner, and renter insurance sold in Washington state.

Now is the best time to shop for auto or homeowner insurance in more than 20 years.

From Consumer Reports :“The smart way to save on car insurance: Your loyalty to one company for long stretches of time may be costing you money”

Why the insurance commissioner took action against credit scoring now:

Insurance rates cannot be excessive, inadequate, or unfairly discriminatory, under state law. This gives the commissioner the authority to enact rules that protect consumers and that provide fair regulation of the insurance industry. The federal CARES Act placed a temporary hold on the use of credit scoring in recognition of the pandemic’s impact on peoples’ credit.

As a result, credit bureaus are currently collecting a credit history that is inaccurate for some consumers and producing unreliable credit histories. Insurers rely on these credit histories to produce their scoring models and set rates for their policyholders. These scoring models are now unreliable, which is why the emergency rule was issued.

The emergency rule prevents insurers from using credit scores as a factor to set rates. This action will adjust rates on average across the state. Some consumers that have been buoyed by good credit may see price increases, just as some anchored down by poor credit will see a decrease.

Removing the use of credit requires that other factors — like driving record and claims history — carry more weight.

No one wants their insurance costs to go up. We get it. Your insurance company is required to tell you when your rate is changing. They should also be transparent and explain how much they relied on the discriminatory practice of credit scoring. Many policyholders are also getting a rate decrease because of this change. But it’s likely your insurance company won’t tell you about that.

The emergency rule was designed to end an unfairness that has existed for more than 20 years and that has surged because of the pandemic and credit freezes. A good driver with low credit score should not pay 70% more than someone with good credit but a DUI, but that’s what was happening in Washington state.

Sample rates for good drivers with different credit compared to someone with a DUI and excellent credit

We’ve heard from some people who believe they’re paying more to subsidize cheaper insurance for people with low credit scores. We understand why they think that, but it’s not accurate. Removing credit as a rating factor eliminates what insurance companies claim is a “discount.” The companies always fail to mention that for decades people with low credit have been paying significantly more to subsidize this discount.

The emergency rule on credit scoring is not giving a subsidy to anyone — it’s removing one.

Insurance companies should never have used credit scoring. It’s always been unfair. It’s unfortunate that most companies relied so heavily on credit scores to determine rate. Consumers should demand transparency from their insurance companies. They should know just how much their credit scores impacted what they paid for coverage. And if they never filed claims and had clean driving records, they should ask their company why they are paying more now.

If your premium is increasing, tell your insurance company they should reward your loyalty and give you a better deal. Or simply ask them why your rates are increasing and ask them to be specific. We got a complaint from a consumer whose premiums increased 28% and the company attributed the entire increase to the credit scoring ban. However, when our consumer advocates contacted the company and asked specifically what drove the increase, the company said only 7% was due to the credit score ban — the remaining 21% of the increase was due to other factors.

Washington state has a very competitive insurance market and there are many companies to choose from.

Here’s a sampling of rates produced by the Consumer Federation of America:

Sample rates are for a 35-year-old, unmarried driver who has been licensed for 19 years and has a perfect driving record with no accidents, moving violations, or license suspensions.

If your rates go up because your company relied heavily and unfairly on credit scoring, you should shop around. It could save you hundreds of dollars a year. Don’t just accept what your company tells you — you have choices. After all, the companies are fond of saying that taking just 15 minutes can save you hundreds of dollars.

They’re not being loyal to you — why should you be loyal to them?

If you need help shopping, contact an independent insurance agent or broker.

Learn more about your options to lower your rates. If you’re unsure about what your company or agent is telling you, contact us and we’ll look into it for you.

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The Washington state Office of the Insurance Commissioner protects insurance consumers and oversees the insurance industry.

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WA State Office of the Insurance Commissioner

WA State Office of the Insurance Commissioner

Washington state Insurance Commissioner Mike Kreidler regulates the insurance industry and protects insurance consumers.

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