As of last week the Washington state insurance commissioner Mike Kreidler is calling for the outright ban of credit scoring as a practice when issuing property, renters, auto or life insurance. When asked about this Mike Kreidler explained that while in normal times credit scoring disproportionately affects lower income and minority communities that will be exacerbated by the long recovery period ahead from the COVID-19 pandemic, he goes on to say that due to the pandemic it will also affect small businesses that are suffering during these times and throughout the upcoming recovery.
So what is credit scoring anyways?
Credit scoring as a practice is one of the many ways insurers determine your potential risk of filing a claim. This is combined with many other factors about you to map out a risk profile. Based on this risk profile insurers will base whether or not to insure you as well as what your insurance rates will be. The Washington state commissioner argues that this practice will hurt lower income families, minority communities as small businesses “for years to come” due to the upcoming pandemic recovery.
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While the proposed ban has early support from lawmakers in the state and will be sponsored in congress by Sen. Mona Das, D- Kent and Rep. Steve Kirby, D-Tacoma. There are people proposing other options. One such option that has come up in conversation is the NCOIL model which is a more comprehensive model of determining risk assessment based not only on insurance scored but varied information that determine the risk involved. Though it weighs your credit score to a lesser amount than current Washington state insurance providers currently do. Proponents of this approach state that that majority of people actually save money on their monthly payments when their credit score is included in the factors considered when devising their risk assessments.
The Washington state insurance Commissioner has aimed to implement restrictions on credit scoring as a practice in the past with success. He has previously made it so credit score cannot be used to deny or cancel coverage as a lone factor as well as making certain factors off limits when determining rates such as medical bankruptcy. Currently people are pointing at his past success as a roadmap as too where these policies will be going in the future.
What do you think about this? Do you agree with the Washington state insurance Commissioner, or do you think that credit scoring actually helps when determining rates for most people? Let us know what you think! If you would like to get a quote before this new practice is potentially implemented REACH OUT TO US TODAY FOR A QUOTE FOR FREE POLICY REVIEW!
If you would like to read more about this topic here are some links to related stories below!
https://www.insurance.wa.gov/credit-scoring-ban?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=
