Policy Documents

Credit Scoring in Washington State

Matthew Glans –
May 20, 2010

Across the country, credit scores play an important role in many insurance companies’ ratemaking. Nearly all insurers and some consumer groups say the use of credit scoring makes sense, because a wealth of research shows that people who do not manage their credit well tend to make more-expensive insurance claims.

Across the country, credit scores play an important role in many insurance companies’ ratemaking.Some consumer groups, however, contend the practice is intrinsically unfair. Credit scores, they point out, don’t directly affect risk. Moreover, insurance companies that use credit scores tend to perform better financially. Thus, they contend, using credit scores is an act of unjust enrichment on the part of the insurance companies.

This paper explores how Washington State has worked to regulate the use of credit scores; considers some proposals that would change the regulation of credit scoring; and lays out the likely consequences of those proposals.