The Washington State Attorney General is investigating auto insurers PEMCO and Progressive for possible racial discrimination against the state’s drivers.
Both companies use consumer credit history, or “credit-based insurance scores” derived from a consumer’s credit history, in setting prices, “despite evidence that this practice disproportionately harms people of color,” according to a statement from the firm. from Attorney General Bob Ferguson. .
“Publicly available information indicates that PEMCO charges people with low credit scores as much as three times those with high credit scores; Progressive also significantly increases premiums for individuals with a negative credit history,” the AG office said.
The investigation became public when PEMCO and Progressive went to court in an attempt to stop the investigation. A Thurston County Superior Court judge dismissed the attempt.
While the agency has a long-standing policy of not commenting on investigations, as the carriers themselves have disclosed its existence and “the high importance and public interest in the practices being investigated,” the agency said it is making sure chose to comment.
Both carriers have a “significant presence” in the state, the office said. PEMCO has issued about 160,000 private passenger car insurance policies to Washington residents, while Progressive also insures “a significant portion of Washington’s drivers.”
“Washington law is clear: unfair, deceptive or discriminatory business practices are illegal,” Ferguson said in a statement. “Significant evidence shows that using credit history to price insurance disproportionately affects people of color — even when their driving history is as safe as white drivers. My office has a responsibility to investigate racial discrimination against Washingtonians. I intend to.”
The Attorney General’s Office is seeking information about PEMCO and Progressive’s compliance with the Washington Consumer Protection Act and the Washington Law Against Discrimination as part of its investigation.
A Progressive spokesperson sent the following statement to Insurance Journal:
“Progressive attempts to price each policy to reflect expected driving behavior and related losses using factors that are objective, predictive, permitted by state law and approved by state regulators. Insurers are prohibited from using factors such as race, income, religion or ethnicity, and we do not use any of these factors or other variables as proxies for those features or characteristics. We fully comply with all applicable laws and regulations in Washington State, and we do not engage in or condone racial discrimination of any kind in our business practices.”
Previous analysis has shown that the use of consumer credit history and/or credit-based insurance scores disproportionately impact people of color, even when there is no difference between the safety of their driving data and that of white drivers.
Earlier this year, four insurance industry associations filed a successful legal challenge against Washington Insurance Commissioner Mike Kreidler’s order to ban the use of credit scores by the state’s home and auto insurers, alleging that Kreidler had overstepped his authority.
Thurston County Supreme Court Judge Indu Thomas ruled that Kreidler’s order did not violate the state’s Administrative Procedure Act, and was not “arbitrary and capricious” as the insurance industry associations had argued in their legal challenge. However, Thomas felt the order “exceeds the defendant’s legal authority”. She issued her final warrant in the case on August 29.
The Office of the Insurance Commissioner based its argument for the temporary ban on the use of credit scores on its authority to ensure that insurance premiums are not excessive, inadequate or unfairly discriminatory. Thomas ruled that this authority was overridden in this case by a specific state law that allows insurers to use credit scores.
In its oral ruling, the judge supported Kreidler’s intent, finding that his office provided credible evidence that the use of credit scores is discriminatory.
“[T]it reflects and the court has no doubt that rule protects Washington residents who have a right to be free from undue discrimination in setting their insurance rates,” she said. “It is well known that there is an undeniable link between race and poverty, and any policies that discriminate on the basis of creditworthiness have correspondingly disparate impacts on communities of color. The temporary rule indeed protects against such discrimination.”
The AG’s office is asking all Washington residents who have information about PEMCO’s or Progressive’s use of credit history in pricing, or deciding whether to offer auto insurance, including people who believe they have been discriminated against as a result of those practices to contact the Wing Luke. Civil Rights Division at 1-833-660-4877 and choose option 9 from the main menu. Individuals may also contact the Attorney General’s Office by email at [email protected]
Featured Image: Attorney General Bob Ferguson. (Provided by Ferguson office)