We are a new advertiser and as part of that we have the opportunity to submit articles relating to our business. Usually, you would want to keep these articles light and covering some engaging topic relating to your business. But unfortunately, this isn’t one of those articles.
During the legislative session, Insurance Commissioner Kriedler lobbied to ban the use of credit scoring in insurance premium calculations. He felt that as a result of the pandemic, many consumers’ credit had deteriorated and as a result they were faced with higher auto and home premiums. After hearings on the matter, the Legislature declined to do so. But after the Legislature had wrapped for the year, the Commissioner issued an emergency order banning the use of credit scoring for determining premiums in Washington for three years.
The emergency order was issued on March 23. It required that by May 6, all insurance companies that use credit scoring tools submit to his office revised rating models that do not include any credit scoring elements. The Office of the Insurance Commissioner (OIC) must approve each of these filings for use beginning June 20, 2021. As of this point, few companies have released their new rating models, so we do not know for certain the impact of this order. But preliminary indications are that many consumers will see a spike in their premiums. Conversely, some will see a rate decrease.
The insurance companies have to implement their revised rating models for any new policies effective June 20 or after and for all renewing policies that are processed June 20 and after. Since most companies send out their renewal policies about a month before they are effective, you will have a bit of time to check out your options.
What does this mean for you? Since the Commissioner’s order also required that the total premiums for the insurer’s book of business remain essentially unchanged, those with higher-than-average credit probably will see their premiums increase and those with lower credit scores should see a premium decrease.
There are a few companies and policies that do not factor in credit to their rate setting. But those are a very small percentage of all policies in force in the state at this time.
If you are an insured that receives a lower premium, that is great, but for those that receive a premium increase what options do you have?
First off, don’t shoot the messenger! Of the agents with whom I have spoken, I do not know of any that are celebrating this order. Also, I do not believe that most companies welcomed this change either as they tried, unsuccessfully, to obtain an injunction to stop the implementation of the order.
Since this order applies to all companies in the state, it is not just your company increasing their rates. If you receive a significant rate increase and want to see what options you have, you will need to shop around.
For some this may be easier than for others. For consumers who purchase online directly from an insurance company, these companies do not offer policies from other companies — you will have to proactively look at different companies.
If you are working with an agent, give a call or send an email. Some agents only represent their one brand, and in that case, just like the online marketplaces you may need to look at other companies or agents to find the best offer.
If your agent represents multiple companies — for example, we represent at least six companies for home and auto — you may ask your agent to see what other options they have for you.
Be sure that you are receiving all of the discounts to which you are entitled. Over the last few years, more discounts have been added to policies. Some of these include discounts for being members of AAA, AARP, UW alumni, taking advantage of telematics program and low mileage discounts. For homeowners, many of the same discounts may apply, but in addition check on discounts for having an alarm system or automatic water shut-off devices.
I expect that our team will be busy with marketing efforts to make sure that in this new environment we are offering the best combination of coverage, premium and service for our clients.
A word of caution: Just as bundling your home and auto with one company can earn you additional discounts, unbundling can have the opposite effect. So, if your auto policy renewal goes way up, and you are shopping around, bring your home policy into the mix as well. Otherwise, if you move the first policy, you may see an increase in the second one due to the loss of the credit for bundling. Depending on the insurer, this can be anywhere from 5% to 20%.
So, for the next year or so as your policies renew, be sure to open the renewal envelope or email when you receive it to see if your premium has been impacted. If after that you want to send a comment to the Insurance Commissioner, you may do by logging on to www.insurance.wa.gov
If you have any questions about this situation that you would like to discuss, I welcome your email at john@mcdonaldmcgarryu.com or call me at 425-774-3200.
— By Meagan McDonald Hyde
McDonald McGarry Insurance Brokers
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