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Senate Bill Report SB 5623

Summary

Senate Bill Report on SB 5623, as of January 6, 2022, for the Senate Committee on Business, Financial Services & Trade, committee activity 1/11/22, sponsor Senator Mullet. The bill is titled an act relating to protecting consumers by limiting the ability of insurers to use credit histories to increase personal insurance premiums at renewal, but not prohibiting the use of credit history by insurers. Its brief summary prohibits that use of credit history at renewal for any personal insurance policy holder beginning on July 1, 2023, and allows insurers to resume the use of credit history effective immediately. The background covers credit-based insurance scores in Washington State and an emergency rule the OIC filed on March 22, 2021, which Thurston County Superior Court overturned in October 2021.

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Issuer
Congressional materials
Document type
Report
Date
2022-01-11
Case
2022 01 11 A29378 D236802 Bill Report 5623 Sba Bfst 22

Cite this document

“Senate Bill Report SB 5623.” Original at app.leg.wa.gov, dated 2022-01-11. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2022-01-11-2022-01-11-a29378-d236802-bill-report-5623-sba-bfst-22/, SHA-256 6bccf88f62f032e2761005c8651e8f518594583f93201d222384821bc973a7c3.

Full text

                            SENATE BILL REPORT
                                  SB 5623

                                      As of January 6, 2022

Title: An act relating to protecting consumers by limiting the ability of insurers to use credit
     histories to increase personal insurance premiums at renewal, but not prohibiting the use of
     credit history by insurers.

Brief Description: Protecting consumers by limiting the ability of insurers to use credit
     histories to increase personal insurance premiums at renewal, but not prohibiting the use of
     credit history by insurers.

Sponsors: Senator Mullet.

Brief History:
     Committee Activity: Business, Financial Services & Trade: 1/11/22.


                                     Brief Summary of Bill
           • Prohibits the use of credit history to increase rates or premiums at
             renewal for any personal insurance policy holder beginning on July 1,
             2023.
           • Allows insurers to resume the use of credit history effective
             immediately.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: Kellee Gunn (786-7429)

     Background: 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 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.




     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 5623
     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.

     Since 2002, credit-based insurance scores (CBIS) in Washington State have been controlled
     by state law. Under that law, credit history may only be used to deny personal insurance in
     combination with other substantive underwriting factors. Certain debts and parts of a credit
     history—such as medical debt and lack of credit—cannot be used in insurance scores.
     CBIS may be used by insurers for new insurance applicants and for current policy holders at
     renewal.

     Emergency Rule Prohibiting the Use of Credit History in Insurance Scores. On March 22,
     2021, the OIC filed an emergency rule- making order to temporarily prohibit the use of
     credit history in determining premiums and eligibility for coverage in certain personal
     insurance products—namely private automobile, homeowners, and renter's insurance. On
     June 20, 2021, the prohibitions in this rule were required for all new policies, and those up
     for renewal on or after that date.

     In October 2021, the emergency rule was overturned by Thurston County Superior Court.
     Normal rule- making has begun to make this emergency rule permanent, with the most
     recent rule-making hearing on November 23, 2021.

     Personal Insurance. Personal insurance includes the following:
        • private passenger automobile coverage;
        • homeowner's coverage, including mobile homeowner's, manufactured homeowner's,
           condominium owner's, and renter's coverage;
        • dwelling property coverage;
        • earthquake coverage for residence and personal property;
        • personal liability and theft coverage;
        • personal inland marine coverage; and
        • mechanical breakdown coverage for personal auto or home appliances.

     Summary of Bill: Beginning July 1, 2023, the use of credit history to increase rates or
     premiums at renewal for any personal insurance policy holder is prohibited. Thereafter
     credit history may only be used for new applicants or for improving an insured’s score that
     results in a lower premium, and policyholders may request, no more than annually, that the
     insurer rerate the policy holders’ insurance score, and use the rerated score if the result is a
     lower premium at renewal.

     Effective immediately, insurers may resume the use of credit history. An insurer is not
     required to update insurance scores more frequently than upon a consumer’s request.

     Any rule that may conflict with this law, must comply with this law. Additionally, any rule
     adopted to implement the laws prohibiting discrimination in insurance must comply.


Senate Bill Report                              -2-                                          SB 5623
     Appropriation: None.

     Fiscal Note: Requested on January 4, 2022.

     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                              -3-                                         SB 5623

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