Purpose: The existing insurance scoring rules, chapter 284-24A WAC, were reviewed and rewritten to provide more information. These new rules will reduce OIC staff time in reviewing rate filings. These new rules will also reduce consumer complaints because consumers will have better information about adverse actions taken by insurers based on insurance scores.
Citation of Existing Rules Affected by this Order: Amending WAC 284-24A-005, 284-24A-010, 284-24A-045, 284-24A-050, 284-24A-055, and 284-24A-065.
Statutory Authority for Adoption: RCW 48.02.060, 48.18.545, 48.19.035, and 48.30.010.
Adopted under notice filed as WSR 04-22-089 on November 2, 2004.
Changes Other than Editing from Proposed to Adopted Version:
• WAC 284-24A-005, bullet three was amended to differentiate between the residential property and the vehicle location;
• WAC 284-24A-010(2) was amended to include the statute reference; and subsection (3) was deleted;
• WAC 284-24A-011 (1)(c) was reworded;
• WAC 284-24A-012, "reasonably" was added to the first paragraph;
• WAC 284-24A-032, "(b)" was added to the RCW cite;
• WAC 284-24A-065(6), the last sentence was deleted.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 4, Amended 6, Repealed 0.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.
Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 4, Amended 6, Repealed 0.
Date Adopted: December 29, 2004.
by Mike Watson
AMENDATORY SECTION(Amending Matter No. R 2001-11, filed 9/6/02, effective 10/7/02)
WAC 284-24A-005 What definitions are important to these rules? "Demographic factors" means the factors listed below if they are used in an insurer's rates, rating tiers, rating factors, rating rules or risk classification plan:
• Age of the insured;
• Sex of the insured;
• The rating territory assigned to the ((
primary home address; and
• The zip code assigned to the insured's primary home address)) property location for residential property insurance and to the vehicle's garage location for personal auto insurance.
"Premium" means the same as RCW 48.18.170.
"Rate" means the cost of insurance per exposure unit.
"Rating factor" means a number used to calculate premium.
"Risk classification plan" means a plan to formulate different premiums for the same coverage based on group characteristics.
"Significant factor" means an important element of a consumer's credit history or insurance score. Examples of significant factors include:
• Bankruptcies, judgments, and liens;
• Delinquent accounts;
• Accounts in collection;
• Payment history;
• Outstanding debt;
• Length of credit history; and
• Number of credit accounts.
"Substantive underwriting factor" means a factor that is very important to an underwriting decision. Examples of substantive underwriting factors include:
• History of filing claims;
• History of moving violations or accidents;
• History of driving uninsured;
• Type of performance for which a vehicle is designed; and
• Maintenance of a structure to be insured.
"Vehicle" means any motorized vehicle that can be insured under a private passenger auto insurance policy.
[Statutory Authority: RCW 48.02.060, 48.18.100, 48.18.120, 48.19.080, 48.19.370, 48.30.010, 49.60.178, 48.18.545(7), 48.19.035(5). 02-19-013 (Matter No. R 2001-11), § 284-24A-005, filed 9/6/02, effective 10/7/02.]
(2) An insurer must explain what significant factors led
to an adverse action ((
in clear and simple language.
(3) An insurer may choose to tell consumers which factors positively affect a consumer's credit history or insurance score)) as defined in RCW 48.18.545 (1)(a). The insurer is responsible for making sure that the reason(s) an adverse action occurred is written in reasonably clear and simple language, even if the reason(s) is provided to the insurer by a vendor.
[Statutory Authority: RCW 48.02.060, 48.18.100, 48.18.120, 48.19.080, 48.19.370, 48.30.010, 49.60.178, 48.18.545(7), 48.19.035(5). 02-19-013 (Matter No. R 2001-11), § 284-24A-010, filed 9/6/02, effective 10/7/02.]
(a) A description of the attribute of credit history that adversely affected the consumer's insurance score;
(b) How the attribute of credit history affected the insurance score; and
(c) Any actions that are available to the consumer that may improve this attribute of the insurance score.
(2) If an insurer refers to insurance industry research or studies to justify the effect of an insurance score on premiums or eligibility for coverage, the insurer must file those studies with the insurance commissioner so that they are available for public disclosure.
(1) Explanations of adverse actions that do not meet this standard include, but are not limited to:
(a) Unfavorable length of credit history.
(b) Absence of revolving credit account.
(c) Age of oldest account or revolving credit account.
(d) Age that consumer first opened a credit account.
(e) Unfavorable number of bank or revolving accounts.
(f) Unfavorable debt ratio.
(g) Unfavorable number of accounts opened in past year.
(2) Insurers must not use the term "unfavorable" to describe an attribute of credit history because it does not provide clear information to the consumer about their credit history.
(1) Conform to the definition in WAC 284-24A-032; and
(2) Are clearly identified.
To ensure confidentiality, insurers should submit eligibility guidelines in a separate and distinct part of the related rate filing so they may be separated from other documents in the filing that are public records under RCW 48.19.040(5).
(1) Submit a multi variate analysis with the first rate and rule filing the insurer makes to comply with this law.
(2) Submit a multivariate analysis any time the insurer uses credit history or an insurance score to revise a risk classification plan, rating factor, rating plan, rating tier, or base rates.
[Statutory Authority: RCW 48.02.060, 48.18.100, 48.18.120, 48.19.080, 48.19.370, 48.30.010, 49.60.178, 48.18.545(7), 48.19.035(5). 02-19-013 (Matter No. R 2001-11), § 284-24A-045, filed 9/6/02, effective 10/7/02.]
(a) For homeowners, dwelling property, earthquake, and personal inland marine insurance:
Credit history;)) Insurance score;
(ii) Territory and/or ((
location)) geographic area;
(iii) Protection class;
(iv) Amount of insurance;
(v) Surcharges or discounts based on loss history;
(vi) Number of family units; and
(vii) Policy form relativity.
(b) For private passenger automobile, personal liability and theft, and mechanical breakdown insurance:
Credit history;)) Insurance score;
(ii) Driver class;
(iii) Multicar discount;
(iv) Territory and/or geographic area;
(v) Vehicle use;
(vi) Rating factors related to driving record; and
(vii) Surcharges or discounts based on loss history.
(2) An insurer must provide a general description of the model used to perform the multivariate analysis, including the:
(a) Formulas the model uses;
(b) Rating factors that are included in the modeling process; and
(c) Output from the model, such as indicated rates or rating factors.
(3) An insurer must show how the proposed rates or rating factors are related to the multivariate analysis.
[Statutory Authority: RCW 48.02.060, 48.18.100, 48.18.120, 48.19.080, 48.19.370, 48.30.010, 49.60.178, 48.18.545(7), 48.19.035(5). 02-19-013 (Matter No. R 2001-11), § 284-24A-050, filed 9/6/02, effective 10/7/02.]
(2) Insurers must submit actuarial data based on demographic factors to support any difference in rates or premiums based on:
(a) "No hit," which means the absence of credit history; or
(b) "No score," which means the inability to determine the consumer's credit history.
(3) The actuarial data must include:
(a) Loss history for an experience period acceptable to the commissioner. The length of the experience period will be determined by the amount of data available to the insurer.
(b) Earned exposures.
(c) Earned premiums.
(d) An analysis of the credibility of the data.
(4) The actuarial data must be segmented by:
(a) Demographic factors, which may be grouped in broader categories in a manner acceptable to the commissioner;
(b) "No hit"; and
(c) "No score."
(5) The actuarial data must show that the proposed rates, rating factors, rating rules, or risk classification plans relating to "no hit" and "no score" comply with RCW 48.19.020.
(6) These filings are subject to prior approval by the commissioner under the provisions of RCW 48.19.040.
[Statutory Authority: RCW 48.02.060, 48.18.100, 48.18.120, 48.19.080, 48.19.370, 48.30.010, 49.60.178, 48.18.545(7), 48.19.035(5). 02-19-013 (Matter No. R 2001-11), § 284-24A-055, filed 9/6/02, effective 10/7/02.]
(2) What types of data can an insurer use to support a credit-based rating plan? A credit-based rating plan must be based on the experience of the insurer, an affiliated insurer under the same management, or a licensed rating organization. The commissioner will accept data from other states where comparable credit-based rating plans are in effect.
(3) The law says an insurer cannot use the number of
credit inquiries to set rates or to deny insurance. Can an
insurer consider the amount of time since the most recent
inquiry? Yes. The law prohibits an insurer from considering
the number of credit-seeking or promotional inquiries. It
does not prohibit ((
you)) an insurer from considering the
length of time since the most recent inquiry about a
consumer's credit rating.
(4) The law says an insurer cannot use collections identified with a medical industry code to set rates or to deny insurance. Not all credit vendors provide industry codes for collection accounts. If a vendor searches for medical references in a text field, would that action comply with the law? Yes. Collections identified with a medical industry code cannot be used. If medical history is not coded or identified, insurers and vendors are not required to perform additional research.
(5) The law says an insurer cannot use the initial purchase or finance of a vehicle or house that adds a new loan to the consumer's existing credit history to set rates or to deny insurance. Can my company use the number of such loans and/or the outstanding balance of such loans?
• An insurer may not use the initial purchase of a home or vehicle to affect eligibility for insurance or insurance premiums. The initial purchase is the first loan taken out to buy a home or vehicle.
• An insurer may evaluate any subsequent borrowing by a consumer.
• A method an insurer or vendor can use to comply with the law is to eliminate vehicle and home loans from the consumer's debt load calculation.
(6) The law says an insurer cannot use the total available line of credit to set rates or to deny insurance. Can my company use number of credit lines with limits over a set amount?
• The law prohibits use of data related to the consumer's total available line of credit. Any attribute that evaluates the total amount of credit available to a consumer is prohibited.
You)) Your insurer may use the debt/credit ratio or
other ratios that consider the actual debt load. (( The law
does not restrict use of ratios that determine whether an
insured is over-extended due to actual debt.))
[Statutory Authority: RCW 48.02.060, 48.18.100, 48.18.120, 48.19.080, 48.19.370, 48.30.010, 49.60.178, 48.18.545(7), 48.19.035(5). 02-19-013 (Matter No. R 2001-11), § 284-24A-065, filed 9/6/02, effective 10/7/02.]