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Washington insurance rates more fair under new rule barring premiums based on credit scores

Consumer Reports offers consumer tips for finding the lowest rates

Insurance companies are no longer allowed to use a consumer’s credit score to price auto, renters, and homeowners coverage under an emergency order issued by Washington state Insurance Commissioner Mike Kriedler earlier this year that will remain in effect for three years.  The new rule is making insurance pricing in the state more fair by ending a practice that discriminates against consumers with lower incomes and disproportionately harms communities of color, according to Consumer Reports.

“Credit scores have nothing to do with whether you are a responsible driver, renter or homeowner and shouldn’t determine how much you pay for insurance,” said Chuck Bell, programs director for advocacy for Consumer Reports.  “This new policy is helping to make  insurance rates more fair in Washington by ending this discriminatory practice.”

The new rule began going into effect on June 20 and some insurance companies who opposed the change have begun sending out notices warning that rates may go up for customers who previously got discounted premiums because they have higher credit scores.  But that benefit amounts to an unfair subsidy paid for by policyholders who were charged more expensive rates because of their lower credit scores, Bell points out. Many people who have been penalized with higher premiums because of their credit scores will see their rates go down significantly. The change in rates will depend on how heavily each insurance company relied on the discriminatory policy.

“Insurers have many other rating factors at their disposal to properly price insurance based on actual risk,” said Bell.  “We all benefit when insurance is priced fairly so that everyone can afford the coverage they need.”

As the debate over insurance rates heats up in Washington, Consumer Reports is recommending a number of steps consumers can take to find affordable coverage:

Shop Around. Loyalty doesn’t necessarily pay; it is a common misconception that insurers reward customers for sticking around. A 2019 Consumer Reports survey found that 54 percent of our members had remained with their current company for 15 years or longer.  But 23% of those surveyed said they had switched insurers in the past five years. Among those, 63 percent said they’d found a better price, and 78 percent said they were highly satisfied with their new carrier.

Shop strategically.  Obtain quotes online or by phone from several companies every year to compare rates. In addition to checking quotes from larger companies, also consider contacting “direct-writer insurers” such as Amica, USAA and Wawanesa that have their own agents and offer competitive prices. Then go to an independent agent to see if he or she can find a better rate through a different insurance company.

Look for cost-cutting options. Choosing a $1,000 comprehensive and collision deductible instead of $500 can reduce your auto premiums by 11 percent. If your car is older, consider canceling your collision and comprehensive altogether, because you could end up paying more than you would get back in repair or replacement costs. Just make sure you can afford to pay the extra out-of-pocket cost if you’re unfortunate enough to get into a crash. For homeowners insurance, going to a $1,000 deductible from $500 can shave up to 25 percent off your premium, the Insurance Institute says.  And going from $500 to $2,500 saves 30 percent or more. 

Actively pursue discounts: They can include breaks for bundling home, auto, and umbrella policies with the same carrier; taking a safe-driving course; letting your carrier know about your lower annual mileage; and reporting your teen driver’s good academic average, typically a B or better. Replacing old plumbing and adding a security system and water or gas-leak detection sensors can each provide insurance savings of 2 to 6 percent or more on your homeowners policy.  Replacing a roof with an impact-resistant one can save up to 35 percent in some states.  Cutting back dry brush around dwellings and outbuildings in a fire-prone area can earn you a 5 percent break on your premium.

Factor in Life Changes. If you get married, add a teen driver to your policy, add or remove a vehicle, or the distance of your commute changes—as it did for many people during the pandemic—ask your insurer how much the changes will cost or save you, and shop other insurance policies to see which carrier can give you the best rate. Also, remember to ask for an adjustment to your coverage to reflect your car’s depreciation; insurers don’t necessarily do that without your prodding.

Don’t skimp on essential coverage. Make sure you carry enough liability coverage, which pays for bodily injury and property damage that you may cause to someone else in a crash or in your home. Get more than the legal minimum even if you don’t have much in assets to protect. Depending on your state, a portion of your wages could be garnished in a judgment against you.

Drop rental reimbursement coverage: If you have another car you can use while your vehicle is being repaired, you don’t need to buy this coverage. You can also skip roadside assistance coverage if you have an auto-club membership that’s a better deal, or if roadside assistance comes as part of your car’s warranty.

Review personal injury protection and medical payments coverage: If you already have good health coverage you don’t need it through your auto policy. Keep the coverage if you don’t have health insurance, or if your usual passengers might not be well-insured.

Michael McCauley, michael.mccauley@consumer.org, 415-902-9537