State Dems, Safeco Battling Over Company’s Use of Credit Scores

August 31, 2006

Washington Democrats and Safeco Corp. are battling over the company’s use of credit scores in canceling policies while Republican U.S. Senate candidate Mike McGavick was chief executive.

The skirmish has moved to Thurston County Superior Court, where Safeco is resisting the state Democratic Party’s request to publicize more data from a 2003 state insurance commissioner’s study, The Seattle Times reported.

Democrats want to know the identity of a company referred to as “Firm 1.” The state study found that firm used credit scores in canceling auto policies, disproportionately affecting minorities, divorced women and poor people.

Safeco is resisting the Democrats’ request, citing concerns about trade secrets. The company also wants to keep secret an unpublished 2002 study by Insurance Commissioner Mike Kreidler, which focused on the effects of Safeco’s credit scoring, The Times reported.

A Thurston County judge has granted a temporary restraining order pending a hearing.

Using credit ratings in insurance decisions has been a contentious practice. Some consumer advocates say it can hit poor and minority populations harder than others.

In 2002, the Washington Legislature banned companies from using credit scores to cancel a policy outright.

A Safeco spokesman said the company complies with the law and has helped the insurance commissioner develop consumer protections.

“Credit scoring is now only one of several factors considered, and it is not used in our renewal process for pricing policies,” spokesman Paul Hollie said.

McGavick also defended Safeco’s record. “Because of credit scoring, we could extend insurance to more diverse neighborhoods,” he told The Times.

McGavick was Safeco’s CEO from 2001 until late last year. He left the company in February, and is the presumptive GOP choice to challenge first-term Democratic Sen. Maria Cantwell this fall.

Kreidler, also a Democrat, said Safeco became “extremely aggressive” in using credit scoring in 2001. Kreidler said he opposes the practice.

State Democrats have focused on McGavick’s tenure with Safeco and his multimillion-dollar compensation package in their campaigns against him.

The party previously asked federal regulators to probe the $28 million McGavick collected upon leaving the company, and have assailed McGavick for layoffs at the company.

McGavick and Safeco have defended his compensation package and his record at the company, with McGavick saying layoffs were a difficult necessity while officials worked to turn the company around.

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