Senate Bill Report — SB 5589
- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2025-02-06
- Case
- 2025 02 06 A32664 D277907 Bill Report 5589 Sba Bft 25
Summary
A Senate Bill Report on SB 5589, as of February 4, 2025, for the Senate Committee on Business, Financial Services & Trade, which heard the bill on 2/06/25; the bill was requested by the Insurance Commissioner. The report describes current law on the use of credit history and insurance scores in personal insurance rates, emergency rules the Office of the Insurance Commissioner adopted in March 2021, and a permanent rule adopted in February 2022 that the Thurston County Superior Court declared invalid in an order issued in August 2022. The bill would require the OIC to study credit history, credit-based insurance scores and other rate factors that may disparately impact Washington residents, and to report by December 31, 2025 and September 15, 2026. Study data would be confidential and exempt from public disclosure, and the new section expires December 31, 2033.
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Full text
SENATE BILL REPORT
SB 5589
As of February 4, 2025
Title: An act relating to conducting a study of credit history, credit-based insurance scores, and
other rate factors that may disparately impact Washington residents, in making rates for
personal insurance.
Brief Description: Conducting a study of credit history, credit-based insurance scores, and
other rate factors in making rates for personal insurance.
Sponsors: Senators Hasegawa, Kauffman, Lovelett, Nobles, Saldaña, Stanford and Wilson, C.;
by request of Insurance Commissioner.
Brief History:
Committee Activity: Business, Financial Services & Trade: 2/06/25.
Brief Summary of Bill
• Requires the Office of the Insurance Commissioner (OIC) to conduct a
study of insurers' use of credit history, credit-based insurance scores,
other rate factors that may have disparate impacts on Washington
residents, and alternatives to their use, for certain purposes.
• Requires authorized insurers transacting personal insurance to provide
requested information to the OIC, and provides for confidentiality,
privilege, and a public records exemption for the data.
• Authorizes the OIC to contract with actuaries and other consultants for
the study.
• Requires reports to the Legislature with findings, policy options, and
recommendations.
SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE
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 5589
Staff: John Kim (786-7453)
Background: Insurance Rate Standard. Current law provides that premium rates for
insurance may not be excessive, inadequate, or unfairly discriminatory.
Use of Credit History or Insurance Scores in Making Personal Insurance Rates. Under
current state law, each insurer that uses credit history or an insurance score to determine
personal insurance rates, premiums, or eligibility for coverage must file all rates and rating
plans for that line of coverage with the Office of the Insurance Commissioner (OIC).
A person's credit history is any written, oral, or other communication of any information by
a consumer reporting agency bearing on that person's creditworthiness, credit standing, or
credit capacity that is used or expected to be used, or collected in whole or in part, for the
purpose of serving as a factor in determining personal insurance premiums or eligibility for
coverage.
A person's insurance score is a number or rating that is derived from an algorithm, computer
application, model, or other process that is based in whole or in part on credit history.
The definition of personal insurance under the state law includes:
• private passenger automobile coverage;
• homeowner's coverage, including mobile homeowners, manufactured homeowners,
condominium owners, and renter's coverage;
• dwelling property coverage;
• earthquake coverage for a residence or personal property;
• personal liability and theft coverage;
• personal inland marine coverage; and
• mechanical breakdown coverage for personal auto or home appliances.
An insurer may not use the following types of credit history to calculate a personal
insurance score or to determine personal insurance premiums or rates:
• the absence of credit history or the inability to determine the consumer's credit
history, unless the insurer has filed actuarial data segmented by demographic factors
in a manner demonstrating compliance with the general rate standard described
above;
• the number of credit inquiries;
• credit history or an insurance score based on collection accounts identified with a
medical industry code;
• the initial purchase or finance of a vehicle or house that adds a new loan to the
consumer's existing credit history, if evident from the consumer report; however, an
insurer may consider the bill payment history of any loan, the total number of loans,
or both;
• the consumer's use of a particular type of credit card, charge card, or debit card; or
• the consumer's total available line of credit; however, an insurer may consider the
Senate Bill Report -2- SB 5589
total amount of outstanding debt in relation to the total available line of credit.
If a consumer is charged higher premiums due to a disputed credit history, the insurer must
rerate the policy retroactive to the effective date of the current policy term. As rerated, the
consumer must be charged the same premiums they would have been charged if accurate
credit history was used to calculate an insurance score. These requirements apply only if
the consumer resolves the dispute pursuant to the federal Fair Credit Reporting Act and
notifies the insurer in writing that the dispute has been resolved.
Rules by the Office of the Insurance Commissioner and Rule Challenge. In March 2021, the
OIC adopted emergency rules prohibiting the use of credit history by insurers in
determining homeowners', renters, and private passenger automobile insurance rates,
premiums, or eligibility for coverage or in placing coverage with an affiliated insurer. The
emergency rules applied to new policies issued and existing policies renewed beginning in
June 2021.
In February 2022, the OIC adopted a permanent rule specifying that the prohibition would
remain in effect for three years following the later of the President's COVID-19 national
emergency declaration on March 13, 2020, or the day the Governor's proclamation of a state
of emergency regarding COVID-19 expired.
In adopting the rules, the OIC cited changes in the federal Coronavirus Aid, Relief, and
Economic Security Act relating to credit reporting during the pandemic, forbearance options
for certain loans, and a moratorium on foreclosures. The OIC made a finding that credit
reporting processes were disrupted and therefore credit-based insurance scoring models
were unreliable under state law.
The validity of the permanent rule was challenged in a petition for declaratory and
injunctive relief filed by the National Association of Mutual Insurance Companies in
February 2022 in Thurston County Superior Court. The action was consolidated with
another petition filed by the American Property Casualty Insurance Association, the
Professional Insurance Agents of Washington, and the Independent Insurance Agents and
Brokers of Washington. In August 2022, Thurston Couty Superior Court issued an order
declaring that the rule exceeded the OIC's statutory authority and that the petitioners were
substantially prejudiced by the rule, and therefore the rule was invalid. The OIC did not
appeal the decision.
Summary of Bill: Study by the Office of the Insurance Commissioner. The bill requires
the OIC to conduct a study of insurers' use of credit history, credit-based insurance scores,
other rate factors that may have disparate impacts on Washington residents, and alternatives
to their use, in determining personal insurance premiums, rates, or eligibility for coverage,
and the associated impacts to consumer costs and the availability of insurance.
In conducting the study, the OIC must collect information from authorized insurers
Senate Bill Report -3- SB 5589
transacting personal insurance, who must provide the requested information to the OIC.
The OIC must investigate and obtain any other relevant information that may assist the
OIC with the purposes of the study.
The OIC must also contract with actuaries and other consultants, as needed, to:
• analyze insurers' use of credit history, credit-based insurance scoring models, or other
rate factors that may disparately impact Washington residents, in determining
premiums, rates, and eligibility for coverage for people of various races, ethnicities,
sexes, socioeconomic status, and national origins;
• identify and analyze alternative rate factors that could be used to determine
premiums, rates, and eligibility for coverage that neither rely on credit history or
credit-based insurance scoring models, nor disparately impact Washington residents
of various races, ethnicities, sexes, socioeconomic status, or national origins;
• analyze the likely impact of the above factors on consumer costs, rates, premiums
eligibility for coverage, and availability of insurance for people of various races,
ethnicities, sexes, socioeconomic status, and national origins; and
• develop for legislative consideration policy options and their likely impacts on
consumer costs, premiums, rates, eligibility for coverage, and the availability of
personal insurance, of use of rate plans that include and exclude credit history, credit-
based insurance scoring models, or other rate factors that may have a disparate impact
on Washington residents.
Report to the Legislature. The OIC must submit a preliminary report to relevant legislative
policy committees by December 31, 2025, and a final report by September 15, 2026, with
review findings, policy options, and recommendations regarding:
• allowance, prohibition, or contingent use, of credit history, credit-based insurance
scoring models, other disparately impactful rating factors, and alternatives to their
use, for personal insurance; and
• the associated impacts on consumer costs, premiums, rates, eligibility for coverage,
and availability of insurance for people of various races, ethnicities, sexes,
socioeconomic status, and national origins.
Confidentiality, Privilege, and Public Records Exemption. Data requested by, or provided
to, the OIC and the OIC's contracted consultants for the purpose of complying with the
study and reporting requirements is confidential, privileged, and exempt from public
disclosure under the Public Records Act.
The OIC may prepare and publish reports, analyses, or other documents using the data so
long as the data is in aggregate form and does not permit the identification of information
related to individual companies. Data in the aggregate form is deemed open records
available for public inspection.
Expiration. The section in the Revised Code of Washington created by the bill expires
December 31, 2033.
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Appropriation: None.
Fiscal Note: Requested on January 31, 2025.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.
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- Original
- app.leg.wa.gov