Auto insurance

FAQs: What changes in Washington insurers’ use of credit history may mean to you

Friday, May 28, 2021by  PEMCO Insurance

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Since the late 1990's, like nearly all insurers, PEMCO has considered individuals' insurance scores (which include credit history) as one of the many factors we use to calculate prices. Along with other variables like personal driving record and past claims, using a person's credit history has historically proven to be a very reliable way to predict both how likely that person is to file a claim in the future, as well as how big those claims are likely to be. And all that's important to account for, so we can do a better job of setting prices and serving our customers. 

In response to the economic impacts of COVID-19, Washington State Office of the Insurance Commissioner issued an emergency rule which prohibits all insurers in operating in Washington State from considering individuals' credit histories in determining rates, premiums and coverage eligibility for personal auto, renter, condo and home insurance. The rule applies to new policies effective on and after June 20, 2021, as well as to existing policies with renewals processing on or after that date.  

The Commissioner plans to extend the emergency rule to last for three years from the date the COVID National Emergencies Act ends or the date the governor ends the state of emergency in Washington State, whichever is later.  

This new rule is a significant change, to be made in a very short amount of time. Virtually every company that sells auto, home, renter, or condo insurance in Washington has been required to change how they calculate rates. Typically, such changes would take months or even years, as insurance companies are required by law to prove our pricing is an accurate reflection of individuals' risks and will, in aggregate, be sufficient to ensure we're able to pay for our customers losses appropriately. In this instance, the emergency rule asked insurers to make the required updates in 45 days.  

While we don't yet know all the answers about how this new statewide rule will affect individual customers, we've compiled the FAQs we can answer below to help make sense of the change. We'll continue to update this list as we learn more. 

Does the emergency rule affect all PEMCO customers?

No. The emergency rule applies only to Washington policyholders who have auto, renter, condo and/or home insurance.  

When will this happen? 

The emergency rule's impact on policies takes effect June 20, 2021. That means for all new policies that start on or after that date, credit history will no longer be used to help in setting prices. Existing policies that will process renewals on or after that date will likewise no longer use credit history, and some customers are likely to see changes in their existing rates as a result. PEMCO's policies renew annually, and the change will apply at your first renewal under the emergency rule.  

Will my rates change as a result? 

More than likely. We anticipate most people will see a change in their rate, ranging from a 20% increase to a 20% decrease. A smaller number of customers may see a more significant change in price due to this new rule. However, if you do see a change on your bill, it's not necessarily entirely the result of this new emergency rule and could be due to changes in your policy, your coverage, your claims, or other factors. 

How will the change appear? 

The new rule will take effect automatically. Just like how any changes in your rates are currently presented, you'll find your new annual premium on your policy Declarations page.  

Can PEMCO do anything to mitigate potential price increases related to eliminating the use of credit history? 

No. As directed by the state, the elimination of credit history is mandated to be a standalone change with no other changes allowed.  

My policy renewed (or will renew) before the emergency rule's effective date. I want the impact of credit history removed now, without waiting for my next renewal after the effective date. 

We're unable to re-rate policies before your renewal date. If you're concerned about your premiums, please contact us. Your local PEMCO agent or a PEMCO representative at 1-800-GO-PEMCO will be happy to help you explore ways to make your policy more affordable. 

Once credit history is no longer used to determine rates, premiums and coverage eligibility, what are some of the factors that will determine my rates? 

We'll continue to rely on the factors we currently use. For auto, they include things like driving record, past claims, annual mileage and the type of vehicle you drive. For homeowners, premium is based on things like past claims, type of home construction, and the cost to replace your home and belongings. 

Looking to the future, we'll also consider the merits of other factors. PEMCO, like most insurance companies, always looks for additional factors that can help us in determining rates for each customer. The more data points we have available, the better we're able to rate you more precisely. PEMCO is committed to ensuring a fair and competitive marketplace for all while upholding our values and financial strength.  

Does this change affect all insurance companies or only insurance companies headquartered in Washington? 

The emergency rule applies to all companies that sell auto, renter, condo and home insurance in Washington and use credit history to determine rates, premium or coverage eligibility, regardless of where the company is headquartered. 

For more about credit-based insurance scores, check out this overview from the Insurance Information Institute: Background on Credit Scoring

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Comments on this post

personWendy Hale07/21/2021 01:37 AM
Washington State: land of the unequal, unfair, and under-represented. Great lobbying efforts, I must say. When will it be time for a different Insurance Commissioner? I dare say, long after I am gone.
personDebra07/17/2021 10:24 AM
Got our home owners renewal recently, our rate went up over 36%. What a rip off. We will be looking into other insurance, but it will probably be futile. Nothing has changed as far as our liability (no accidents, claims, additions, etc in years). Why are we being charged at more than the anticipated 20%? We are retired seniors and can't afford all these increases in insurance, food, utility rates, etc. We were never high earners, in fact lower middle to middle class, and worked hard to obtain an excellent credit score.
personBrady Smith07/12/2021 11:47 AM
In 2002, the Office of Insurance Commissioner adopted Chapter 284-24A WAC RULES THAT APPLY TO INSURERS THAT USE CREDIT HISTORY FOR PERSONAL INSURANCE UNDERWRITING OR RATING (  If he's changing the rules, there's a mandatory administrative process to be followed. 

The so-called Emergency Order has the Commissioner out "over his skis"  as his office has filed a Pre-Proposal Statement of Inquiry ( to solicit comments on changing the adopted rule, although it will likely be a "fait  accompli" ignoring any comments that don't fit his planned result.

You are encouraged to get involved in the commenting process if you want your opinion to be heard.

Disclosure: I am a retired insurance professional who spent many years researching and understanding insurance laws and regulations throughout the U.S.
personDusty ResponsibleCreditUser07/11/2021 02:33 PM
And yet we can continue to expect different rates based on gender and age right? Seems about right.... not. I don't expect to end my relationship with PEMCO, but sure is a bad deal.
personPEMCO Insurance07/09/2021 10:22 AM
We understand your frustration. The emergency rule banning credit was made quickly, prescribed that insurers comply by not impacting total premium they collect (which means some policy premiums increase and some decrease) and didn’t allow insurance companies to mitigate the resulting impacts to your rates. We recommend that anyone who has questions on their policy and premium contact us. Credit is only one factor of many that determine what you pay, and there may be other reasons why your rate has changed. 
personKayla07/07/2021 06:12 PM
Folks.... this is a result of (and ONLY OF)your insurance commissioner. What Pemco doesn't give you details on (and you should read more to be informed) is that the legislature stalled on this, so he issued an emergency order.  The problem? The OIC is not an office that can make laws.... he can only regulate the industry.  
Further HE HAD THE OPPORTUNITY TO COMPROMISE - and let those who BENEFIT from credit in the rating process, use it....and to let those who had a negative impact, not have it considered. He passed on that opportunity. 
Every insurer is under the same order (in WA).  Be mad. Do something about it. Call the insurance commissioners office. Write a complaint. Let your voice be heard. Your credit score is representative of you - so you deserve to benefit from it. 
Also - please read the details on the emergency order. Federal protection is already in place for any adverse credit reporting as a result of covid.
personTracie07/06/2021 10:18 AM
Mine went up too.  The shocking is I have to call LexisNexis in order to understand why and then I get the information within 8 weeks.  I should say fill out an online form and submit my ss number.  Can't wait to see what the homeowners insurance will be.  No accidents, retired now and hardly drive either auto.

Pemco does not determine your rates, Lexis does.  So who on earth gave my ss to lexis?
personDenise 07/05/2021 10:48 PM
If my hunch is correct, the premiums of those with good credit will increase to compensate for the decrease in premiums of those with poor credit.  Sounds about right for the government of Washington. 🤦🏻‍♀️ SMH
Remember this at the polls.  This Insurance Commissioner is in his 6th term, first being elected in 2001.
personTim McIntosh07/02/2021 06:48 AM
My car insurance premium went up over 50%, this is totally outrageous.   I called Pemco, got a minor reduction due to education, and raising deductibles.   I still don't understand this.   My driving has not increased, no accidents, no violations,  thought this was supposed to be based on your driving record and cars you own.

To me this seems an excuse to raise rates.  When this goes away, which is very possible I wouldn't be suprised to  find out the rates are not going down.  I am going to check other companies, but I would expect they are all using this strategy.

very upset, as a senior citizen on a fixed income
personCarol Frizzell07/01/2021 04:49 PM
My homeowners coverage went up 50% and some endorsements were eliminated.  This despite several years of coverage, no claims, multiple policies, and good driving records.  Absolutely incredible!
personAlan Martin06/27/2021 11:00 AM
I request PEMCO make known the premium amount that would have been charged if it were in part based on credit history. Customers deserve to know the direct impact of the change rather than guess the reasons for an increase.
personJohn06/23/2021 05:12 PM
If I had a very good credit score in the past and you now can no longer factor that in, it seems that you will raise my policy costs, with all other factors being equal.   Likewise, if I had a poor score before, there's a good chance my renewal cost will go down.    Right?

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