Washington State Judge Overturns Credit Scoring Ban
Washington State Judge Overturns Credit Scoring Ban
The Washington State Office of the Insurance Commissioner was denied the legal authority to unilaterally forbid the use of credit information for rating and underwriting by a Superior Court judge late last week.
This decision benefits the Independent Insurance Agents & Brokers of Washington (IIABW) and other insurance associations.
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A rule that Washington Insurance Commissioner Mike Kreidler proposed in February that would have forbade insurers from using credit history information in connection with the rating and underwriting of renters’, homeowners’, and auto insurance for at least three years was challenged by representatives of the industry. The court agreed with the petitioners’ claim that the commissioner went over his bounds.
The decision is the most recent development in the insurance commissioner’s ongoing, multi-year campaign to ban the use of credit histories and other credit-related data in his jurisdiction. On multiple occasions, Kreidler sought passage of legislation in the Washington Legislature that would have completely banned the use of such elements, replacing the long-standing legislative constraints that apply to their usage.
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Washington State Judge Overturns Credit Scoring Ban
When his advocacy at the state legislature failed, the commissioner maintained that he already possessed the authority needed to implement such a ban and sought to do so by regulation. The chairman of the Washington State Senate Business, Financial Services, and Trade Committee described the change of direction and issuance of the rule as an “inexcusable attempt to evade and subvert the legislative process.”
The commissioner has been rejected by the courts twice in less than a year, according to the judge’s ruling. In early 2021, he attempted to enact a similar prohibition by issuing an emergency rule. The IIABW and the same coalition of business organizations also challenged that regulation, which a state court later overturned. In the brief period that it was in force, the emergency regulation resulted in a chaotic market, with rate rises for hundreds of thousands of consumers as a result of the limitations placed on risk-based insurance pricing.
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These recent events in Washington state are also an example of an emerging and troubling trend. Insurance officials in some states have exhibited an increased willingness to exceed their statutory authority and to unilaterally engage in the type of lawmaking that is reserved for state legislatures.
Washington State Judge Overturns Credit Scoring Ban
Regulators in New York and numerous other jurisdictions, for example, have recently adopted expansive new marketplace requirements governing annuity transactions and sought to alter the legal standards of care that apply to agents selling annuities. Big I New York is challenging the annuities rule adopted by its officials, and oral arguments before the highest court in the state are scheduled to take place on Sept. 8.
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It is unclear whether Kreidler will appeal last week’s Superior Court ruling. He indicated in a released statement that he intends to consult with his attorneys and also hinted that any subsequent policymaking may be best left in the hands of lawmakers. Kreidler ironically stated that the decision “confirms that the best place to permanently address this issue is in the legislature.”
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