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

personVK09/08/2021 11:34 PM
Government may want to provide relief to the needy but not at the cost of jacking the price up for others. If a person doesn't have a good score because of pandemic, his requirement for credit score can be omitted but this doesn't definitely mean that you have to deprive others with good score and penalize them. It is so bizarre that I can't even understand whether we have really educated people in those positions.
personAnn09/07/2021 01:59 PM
This is outrageous, however, this is not Texas or Florida.  We can write our state representatives, the governor and our insurance commissioner . . . but because of the prevailing philosophy in Washington, my opinion is this will do nothing.  Robbing one group to give to another is the definition of communism.  Think about it, we are now no longer constrained by societal mores to pay our bills on time or follow traffic laws.  Another attempt to destroy our culture and country.   Will this be factored into the inflation index?  Thank you Governor Newsom. . .North.
personPETER SHREVE09/05/2021 01:16 PM
My homeowners insurance increased 37% solely due to the emergency ruling SB 5010-2021-22; an additional increase of 3% was due to a rate increase.  This ruling was made and passed/filed by a committee and never voted on by the legislature. It clearly forces people with historically good credit scores to subsidize people with historically bad credit scores (which cost more to insure).  This is grossly unfair and discriminatory and allows insurance companies to increase  profits far beyond limits set by the Office of the Insurance Commissioner. It makes sense that the insurance companies are not fighting this dysfunctional ruling.  It was definitely not well thought out or written. It is critical that all adversely impacted contact their state senators and representatives to insure it does not get extended three more years.  This can be easily done at:
personN809/01/2021 11:02 AM
From Pemco's response above:
"First, the emergency rule issued by the Washington Office of the Insurance Commissioner (OIC) required all insurance companies to make this change revenue neutral."
So shall we read this to say the OIC made this emergency rule to help those constituents that are struggling financially, but not at the expense of the insurance companies and instead by punishing those insurance customers with less costly claim records?  It seems like we can certainly interpret it that way and then it starts to look like another 'tax the rich' tactic that only hurts the diminishing 'middle class' and rewards insurance companies for essentially making a few tweaks to their quoting software, not actually working for their customers.  This definitely indicates that Pemco has no skin in the game at all and refuses to challenge the powers that be to do right by their customers.  A pattern of Pemco over the last decade or so in my experience.  Perhaps the OIC made the revenue rule because they thought they were protecting the folks with worse credit from higher rates...they either didn't think and/or didn't care about those on the other end of this change.  Or perhaps the rule actually states that the revenue can't increase from raising premiums for those with lower credit ratings and Pemco et al decided that means revenue must remain neutral across the board?  Their response indicates that they're only raising premiums for those with good credit ratings to offset the loss of revenue from those with bad credit ratings....
Also from Pemco's response above:
"Credit has only ever been one of many factors used to calculate premiums. Your driving record, your past claims, and the details of your homes and vehicles are some of the many factors that we have historically used as well. Credit has proven very predictive of future claims, and for 20 years the OIC allowed the regulated use of credit to help insurance companies reduce prices where historical loss data suggests they can. The emergency rule has taken that option away."
I remember when using credit score became allowable (has it really been 20 years? wow, time flies eh?).  It was a big deal back then for the same reason being stated now; it unnecessarily and unfairly hurts those people that are struggling financially.  But, if I remember correctly, folks that had better credit ratings suddenly saw a drop in premiums so people largely stopped talking about it and the folks being hurt the most were squelched and the issue fell by the wayside.  But read Pemco's response I snipped above.  It says that 'Credit has proven very PREDICTIVE of future claims.'  How much weight should really  be placed on predicted claims?  This seems to border on 'guilty until proven innocent'.  When I first started driving, I couldn't drive the first car I bought for about a month and a half because teenagers statistically had more claims and I had to save up for the justifiably expensive premium payment after I spent most of my savings on the car.  Surely Pemco and the insurance companies can put their data analyzing horsepower into researching PAST claims statistics vs. demographics instead of using a credit score (for something it was never intended for) to label people with something that is merely 'predictive'?  C'mon Pemco, stop playing the victim and try to innovate here.
personCynthia 08/24/2021 09:26 PM
I have been a loyal Pemco customer since 1977, and  I am disheartened and disappointed in  receiving such a huge auto insurance premium increase.   I have never had a traffic ticket or accident, and this hike seems way too extreme.   We should reward safe driving and loyalty; not discourage it.   I have always trusted Pemco but now I am deeply saddened that something like this can happen.  We are losing common decency and any sense of "fair play" infrastructure in our society.  
personSophia08/19/2021 04:15 PM
Why in the world would the Insurance Commissioner pass on allowing those w/good credit scores continue to use that info for ins. and give a waiver to those economically impacted by the pandemic?  It seems after reading the comments above that the Ins Commissioner did have the opportunity to do so and didn't.  This is such a misguided way to help us recover from the Covid chaos.  There should be help for those on fixed income whether retired or disability. 
personJohn08/15/2021 09:06 PM
My Home (over 30 Yrs w/pemco) went up 30%. Does this mean I was getting a 30% reduction in my premiums for a good credit score? I think not. Can't wait to get the auto. Pemco's explanation did not mention any attempt to mitigate the increase and I am seeing a boardroom full of grinning shareholders after being told they can increase profit by 30% and blame it on the state. It will be interesting to see the revenue #'s on their annual report this coming year. OH and Yes I too will be shopping.....
personjulie08/14/2021 10:06 AM
My home policy went up 40%. So let me get this straight....good credit score you pay more, poor credit score you pay less. I'm paying for the irresponsible person....AGAIN
personPEMCO Insurance08/11/2021 04:30 PM
Thank you to everyone for your comments. We hear your frustration, and we want to do everything we can to help our customers. From the discussion below, we’d like to clarify some points regarding the removal of credit information in determining insurance premiums.

First, the emergency rule issued by the Washington Office of the Insurance Commissioner (OIC) required all insurance companies to make this change revenue neutral. PEMCO and other companies are required to keep total premiums unchanged, meaning that if removing credit as a factor reduced premiums for some policyholders, premiums must be increased for others in order to maintain the same overall premium volume for each insurer.

Second, the estimated $955 billion in “surplus” the OIC has cited is a nationwide figure, not specific to PEMCO or even Washington state. Surplus funds can’t be used at the discretion of individual insurance companies. They’re there to provide protection to their insureds against covered losses.

Credit has only ever been one of many factors used to calculate premiums. Your driving record, your past claims, and the details of your homes and vehicles are some of the many factors that we have historically used as well. Credit has proven very predictive of future claims, and for 20 years the OIC allowed the regulated use of credit to help insurance companies reduce prices where historical loss data suggests they can. The emergency rule has taken that option away.

All that said, PEMCO is always looking for ways to improve our products and provide competitive rates. If you have seen your rate go up, please talk with your agent or call us directly to review your policy and help you to determine the right amount of coverage for you, and all the discounts you qualify for.
personDennis08/10/2021 08:04 PM
This is BS, it is all about the money and greed on the part of insurers. Everyone is raising prices on everything, so lets get Pemco in line and jab its customers; they don't care about your credit rating, your non claim status, whether you are retired or still fully employed. I have been with Pemco since 1990, have never even looked for another insurance company until now ... bye bye Pemco, I went from $490 to $752.
personRod08/10/2021 02:30 PM
If the state insurance reserve was 9 billion and there was no need to raise everyone’s rates. Mine went up 30%.
personJon08/06/2021 01:00 AM
Very interesting comments, however there are points being missed.  An early on effort to drag this outrageous matter before a liberal judge to reverse the Insurance Commissioner's emergency rule failed.  In my contact with Pemco they state they are "studying" further court action.  The truth of the matter is Pemco really has no skin in the game on this issue because the rates reduced for those with poor credit rating are increased on the other end with higher rates for people with responsible records of bill payment.  There is likely no net loss or gain for Pemco.  I have been with Pemco over 25 years with a very minimum amount of auto or home claims and I feel that while that the Insurance Commissioner's emergency rule isn't of Pemco's making they might get some loyalty in behalf of their insured by appealing the lower court's ruling. 
There is one other matter.  I always thought Pemco was a premier insurance company which one would reasonably think is comprised of first rate responsible clients.  When did Pemco start insuring less responsible drivers and home owners that the rest of us now have to pay for? 
personWilliam Suhm08/05/2021 04:03 PM
We are going to review our bundled policies and shop for others.
We have no had any home claims and one autos claim since 1976.
We are also retired and are watching political missteps taking our cost of living too high.
personRick08/04/2021 05:30 AM
I received my notice of change in premium on Saturday..up a WHOPPING 57%!!!!!
My total of coverages PEMCO would be responsible for in a "total loss" went up only 10%.
I have to say that the commissioner made a less than informed decision and if the "billions in insurers reserves" comment is true then PEMCO and other companies have over-reacted to the side of greed.
personEdwin08/03/2021 06:55 PM
Comment by Jeffhere/08/03/2021 nailed it! In the interest of “equality” .I am betting that this will be made permanent in this state!they will say using credit scores is discriminatory to make it permanent!guess I need to move to a red state!
personRuss08/03/2021 05:15 PM
What an ignorant statement that its the Dems if the greed, grift, corruption, and sheer conspriracy craziness of Trumpians isn't the real threat.
personJulie Stream08/03/2021 03:38 PM
What I don't understand is if a policy holder has had a solid, clean record with their insurance company, no claims, etc., then that information should be taken into consideration when determining rate increases/decreases, particularly in the absence of obtaining current credit scores.  I get angered by company's that ignore a solid history of a customer's business and seemingly, arbitrarily, stick it to the customer the first chance they get.
personjeffhere08/03/2021 12:53 PM
This is the result of dems that have been ruining the state in many aspects "because equity". Good credit customers will now pay more for bad credit losers.

"contact your rep, the commissioner, etc" so nothing will be done. Start voting R to change things....
personDennis08/02/2021 03:07 PM
We have been with Pemco for many, many years and are now retired. This increase in our homeowners insurance of 30 percent is ridiculous when we have never had a claim, nothing has changed except this new credit policy. Our credit has always been excellent. We will be looking to change insurance companies and giving our 2cents worth to the insurance commissioner. I am not paying more for someone elses bad credit rating!
Pemco, you could do better by your long term customers and evaluate each policy individually like you should be doing!!
personCharles08/02/2021 10:26 AM
A 54% increase on my homeowners premiums is ridiculous!  After 45 years without a claim I'd say PEMCO should be able evaluate my "insurability" without Experian's help.

Just means I get to spend the next month collecting quotes from competitors.

btw, I am not living adjacent to the CHOP or next to a woodland ready to burn.
personStephanie07/30/2021 02:21 PM
I did write the commissioner and all I got back was that the insurance agencies have $9 billion in reserves and they didn’t have to raise rates. Called Pemco about premiums since in 35 years with them have never had a claim. Answer to that was we can change your policy (lessen the coverages -significantly) and that will lower your bill. Ours went up 25% on home. Explain that.  Why wasn’t something sent out to clients so they were aware and could of spoken up? Not that the commissioner cares either.   No wonder  bailing out of WA state
personEarlene07/29/2021 11:03 PM
Part of the problem is your credit report and its FICO score.  There are three credit reports, and their FICO scores are never the same.  If the insurance co., or anyone else for that matter, is using TransUnion, the score will be up to 100 points different than Experion, or more.  TransUnion may score you at 636 while Experion's score may be 750.  Another factor is that the scores have not remained constant.  20 years ago,  700 was the highest score that you could earn.  When too many people were getting better scores, and were approaching the levels that would give them the best rates for loans, the minimum score for the best rates went up to 720, and then 750.  Now they are approaching 900.  I'm sure the Insurance Commissioner knows this and is trying to mitigate on behalf of the people who are going to have, or have had, their rates impacted by a score they have no control over. I should think that eliminating this one aspect of determining rates should make most peoples rates go down, not up, if all else remains the same, and if all parties play fair. 
personDona07/26/2021 09:04 AM
Auto insurance went up 15% plus. $150 a year. That is through geico.  Checked out progressive, their quote less than what I was paying previously to geico. Was thinking about Pemco but seems they are going along with the program.  Emailed insurance commisioner about 2 weeks ago.  No response. How can we stop this? Sure the gov could care less. I am a senior on fixed income.
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?

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