Washington State: Insurers need to notify policyholders before rate hikes

A new regulation proposed by Washington state Insurance Commissioner Mike Kreidler requires insurance companies to explain premium increases to their policyholders in "language they can understand."

But an industry trade group says the effort contributes to the bureaucratic delays that threaten consumer access to insurance coverage.

Washington regulators say the number one complaint they hear is from consumers "is that their auto or homeowners insurance premium is increasing, and their insurance company has not explained why," the Office of Insurance said in a news release.

The OIC held five meetings with industry parties over the past year in an effort to learn how and why premium changes occur.

"We learned that some insurers’ rating formulas have become so complex, they can’t readily specify the reasons behind someone’s premium change," the release said. "Some insurers’ computer systems are unable to generate a clear answer."

'More complicated'

Mark Sektnan is vice president, state government relations, for the American Property Casualty Insurance Association. Insurers want to be transparent about rate increases and why they happen, he said in an email, but the Washington proposal only adds "more complicated" and unnecessary delays to the business of providing insurance.

"This regulation has the real potential to delay the approval of rate filings, which will delay the availability of insurance products to consumers," Sektnan said.

The APCIA is in talk with regulators from the National Association of Insurance Commissioners and the National Conference of Insurance Legislators on uniform rules for alerting consumers when there is a "significant increase in premium or change in coverage terms," he added.

The NAIC said its Transparency Working Group is looking at the Washington proposal.

Insurers are concerned about adding disclosure costs that would ultimately be passed on the consumers, Sektnan said.

"We support a consistent approach in the states as opposed to a patchwork of different requirements," he added. "It is very difficult for national carriers to meet single state complex disclosure requirements."

Two phases

The Washington proposal implements the new rules in two phases and it applies to all property and casualty insurers in Washington state that sell private passenger auto and homeowners coverage, including coverage for manufactured homes, condominiums and renters.

The two phases are:

From June 1, 2024, to June 1, 2027: When a policy renews and the premium increases, insurance companies must give policyholders who ask reasonable explanations using terms they can understand.

Starting June 1, 2027: Insurance companies must provide a written notice to policyholders who received a premium increase of 10% or more explaining the primary factors behind the increase. They must also provide this same notice to any policyholder who asks. Primary factors include: the vehicle’s location, driving record, miles driven, number of drivers, claims history, discounts, fees and surcharges, the driver’s age, credit history, education, gender, marital status, occupation, property age, and value.

“If your insurance company is going to increase your premium, you have a right to know why,” Kreidler said. “This is pretty basic information you should expect from your insurance company, but we hear from hundreds of consumers every year who cannot get a straight answer on why they’re being charged more.”

A public hearing on the rule takes place at 9 a.m. local time April 25 via Zoom.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.