Clark County resident sees insurance rates jump after new state ruleSubscriber Exclusive

If you are planning to renew your home or car insurance policy soon, you could be in for some severe sticker shock.

That was the experience of 76-year-old Ridgefield resident Tom Effinger. When Effinger recently opened his renewal notice, he discovered his homeowners insurance had gone up 45 percent and his auto insurance had increased 38 percent.

“I spent most of the afternoon talking to my insurance agent, and the company that covers my insurance, and what I’m finding out is the better your credit score is, the more you’re going to pay for insurance,” Effinger said.

The rate increases stem from a March 2021 emergency order from Washington Insurance Commissioner Mike Kreidler prohibiting insurers from using a policyholder’s credit score to price auto, renters and homeowners coverage. The order applied to policies being renewed after June 20.

Credit scores, along with other factors like the policyholder’s age, driving record, car model and home location, all help determine insurance premiums. According to providers, credit scores more accurately predict the risk of a claim being filed by the policyholder than other factors.

Kenton Brine, president of Northwest Insurance Council, said Kreidler’s order may affect rates for up to 1 million people, noting that credit scores have been used by insurance companies in Washington for nearly 20 years.

One group who seems to have been hardest hit by the rate changes is senior citizens, who are often on a fixed income and are least able to adjust to the increases.

“I’ve worked all my life to make sure I have a good credit score. Up until this year, they determined what my insurance premiums were going to be based on my credit score and now they arbitrarily decided to extort an additional $1,100 out of me over last year’s premiums,” Effinger said.

But not everyone will see a rate increase for their car, home or renters insurance. Brine said some people may see their rates go down. For those facing increases they can’t afford, there doesn’t seem to be a lot of options.

“Policyholders facing unexpected rate changes because of the emergency rule can shop around for coverage,” Brine said. He also suggested customers talk with their insurance company or agent about changes to policy limits or type to reduce the impact.

“In terms of senior citizens who may be impacted, we encourage people to contact our office if they’re getting a rate increase. We can contact their company on their behalf to see what additional issues there may be causing the change,” said Stephanie Marquis, media and outreach manager for the Office of Insurance Commissioner.

“In general, we advise people to shop around as Washington has a very competitive insurance market. There may be insurers who rely less on credit scores and more on claims history and driving records,” Marquis added.

However, Kreidler’s emergency order was invalidated Oct. 12 by a Thurston County Superior Court judge. The judge’s ruling was in response to a suit filed by the American Property Casualty Insurance Association, the Professional Insurance Agents of Washington, the Independent Agents and Brokers of Washington, and the National Association of Mutual Insurance Companies.

But don’t expect insurance companies to start adjusting their rates just yet.

“All insurance rates and forms have to be approved in advance by the Washington State Insurance Commissioner’s Office,” Brine said. Which means any adjustments would likely not be made until well into next year.

Meanwhile, Kreidler has been working to permanently eliminate the use of credit scores by insurance providers, including backing Senate Bill 5010 during the last legislative session. The bill was gutted by a Senate Business, Financial Services and Trade Committee amendment and failed to make it pass a second reading.

Kreidler is now looking to enact a new rule that would ban the use of credit scores for insurance policies for three years beginning Jan. 1. A public hearing on the proposed rule is scheduled for Nov. 23.

“The insurance industry in Washington wants to hang on to an unjust, secretive and unrealistic method to determine what consumers pay to insure their vehicles and homes,” Kreidler said in a prepared statement. “I will continue a well-supported effort to permanently ban credit scoring. Consumers deserve better. The multibillion dollar industry needs to take action to rid itself of this unreliable practice.”

California, Massachusetts and Hawaii already ban the use of credit scores for insurance purposes.

Brine suggested consumers also contact their legislators to let them know what impact “rate increases are having on their insurance and family budgets.”

“People who believe the emergency rule has caused needless disruption, market chaos and unfair rate increases for consumers, and who oppose having a new, permanent rule take its place, have the chance now to send written comments or sign up to make comments for the record,” Brine added.

Comments for the Nov. 23 hearing must be received by the Washington State Insurance Commissioner’s Office by Nov. 22. For more information, go to https://bit.ly/3jXMZXI.