Senate Bill Report SB 5010 — Prohibiting Use of Credit Scores for Personal Insurance Rates (January 13, 2021)

Summary

A Senate Bill Report on SB 5010, as of January 13, 2021, for the Senate Committee on Business, Financial Services & Trade, with committee activity listed on 1/14/21. The bill's title is An act relating to prohibiting the use of credit scores to determine rates for personal lines of insurance. The Brief Summary says the bill prohibits the use of credit history in determining rates or premiums for personal insurance. The Summary of Bill states that, effective January 1, 2023, insurers must not use credit history to determine rates or premiums for personal insurance policies issued or renewed. It lists the appropriation as none and a fiscal note requested on January 7, 2021.

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Full text

                             SENATE BILL REPORT
                                   SB 5010

                                      As of January 13, 2021

Title: An act relating to prohibiting the use of credit scores to determine rates for personal lines
     of insurance.

Brief Description: Prohibiting the use of credit scores to determine rates for personal lines of
     insurance.

Sponsors: Senators Das, Randall, Dhingra, Hunt, Keiser, Kuderer, Nguyen, Pedersen, Rolfes,
    Van De Wege, Wilson, C., Liias, Carlyle, Lovelett, Nobles, Saldaña, Gildon, Hasegawa,
    Stanford, Robinson, Billig and Conway; by request of Insurance Commissioner, Office of
    the Governor.

Brief History:
     Committee Activity: Business, Financial Services & Trade: 1/14/21.


                                      Brief Summary of Bill
           • Prohibits the use of credit history in determining rates or premiums for
             personal insurance.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: Kellee Gunn (786-7429)

     Background: Personal Insurance. Personal insurance includes the following:
        • private passenger automobile coverage;
        • homeowner's coverage, including mobile homeowner's, manufactured homeowner's,
          condominium owners, and renter's coverage;
        • dwelling property coverage;
        • earthquake coverage for residence and personal property;
        • personal liability and theft coverage;
        • personal inland marine coverage; and



     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                             SB 5010
         • mechanical breakdown coverage for personal auto or home appliances.

     Credit History and Insurance Scores. Credit history is any information provided by a
     consumer reporting agency on a consumer's creditworthiness, credit standing, or credit
     capacity. An insurance score is derived from an algorithm or model that is based in whole
     or in part on credit history. Credit history may only be used if the insurance scoring models
     are filed with the Office of the Insurance Commissioner (OIC) by the insurer. Using credit
     history or an insurance score to determine rates, premiums, or eligibility depends on the
     insurer and the regulator. Personal information, such as gender, age, or marital status,
     cannot be used in a credit-based insurance score.

     Use of Credit History in Insurance. Insurers may use credit history to determine how much
     premium to charge or whether to issue or renew an insurance policy. Depending on the
     state, certain limits and restrictions exist on how an insurer may use credit history.

     In Washington State, credit history may only be used to deny personal insurance in
     combination with other substantive underwriting factors. A person may not be denied
     insurance coverage or have their premiums or rates determined by the number of credit
     inquiries; collection accounts identified as medical bills; buying or financing a first vehicle
     or first house; the type of credit, debit, or charge card used; or the total available line of
     credit in their credit history. Additionally, a person without credit history cannot be denied
     insurance coverage.

     Summary of Bill: Effective January 1, 2023, insurers must not use credit history to
     determine rates or premiums for personal insurance policies issued or renewed.

     Prior to January 1, 2023, if an insurer files rates and rating rules for personal insurance
     using credit history, the insurer must submit a filing to remove the use of credit from its
     rates and rating rules. On or after January 1, 2022, the OIC shall disapprove an insurer's
     filing of rates and rating rules for any type of personal insurance that uses credit history to
     determine its rates unless the filing:
          • has the effect of removing credit history from the rates and rating rules for that type
            of insurance; or
          • was previously submitted to remove the use of credit history from its rates and rating
            rules.

     Appropriation: None.

     Fiscal Note: Requested on January 7, 2021.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: The bill contains several effective dates. Please refer to the bill.



Senate Bill Report                              -2-                                         SB 5010


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