Can't understand why your car insurance went up? That may change

OLYMPIA — Washington Insurance Commissioner Mike Kreidler says insurers owe customers a clear explanation for any hike in their auto and home insurance premiums.

On Tuesday, he set out to require it.

Kreidler proposed a new regulation requiring greater transparency of specific factors driving up the cost of a premium.

Specifically, it says insurers must "provide sufficient information, in terms that are understandable to an average policyholder, which enable the policyholder to figure out the basic nature of any premium increase."

Kreidler said in a statement it 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."

Under the proposed rule, starting June 1, 2024, if a premium increase occurs when a policy is renewed, companies must provide policyholders "reasonable explanations" upon receiving a written request from the customer.

After June 1, 2027, insurers must automatically disclose the reasons in writing when a premium increase is 10% or greater. For smaller increases, a policyholder can submit a written request and the insurer must provide a rationale.

The rule would apply to all property and casualty insurers in the state that sell private passenger auto and homeowner coverage, including coverage for manufactured homes, condominiums and renters. Insurers of health, disability, life, and long-term care would be exempt.

Kreidler launched this rule-making effort in February 2022.

The initial filing states the lack of transparency "prevents the insurance consumer from making informed decisions on their insurance policies, renewals, coverages, and pricing. Allowing insurers to make rate changes or to take adverse actions against consumers who are at a significant disadvantage in these dealings, where there is also lack of full disclosure, complete transparency, and fairness, results in unfair and deceptive trade practices."

Commission staff conducted five meetings with interested parties on the proposal, the most recent occurred last month.

Several factors are used to calculate an auto or homeowner insurance rating. These include a 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.

Commission staff learned some insurers' rating formulas have become so complex, they couldn't readily specify the reasons behind someone's premium change. Some insurers' computer systems are unable to generate a clear answer, staff noted.

Insurers said they want to ensure customers understand what's going on, but the proposed mandate could make the process more complicated, they argued.

"Our concern from the outset with the premium change transparency rule is that it would end up requiring policyholders to wade through massive explanatory documents filled with equations and formulas better suited to insurance actuaries and regulators – rendering the information useless to consumers, at the potential cost of hundreds of millions of dollars to insurers," said Kenton Brine, president of NW Insurance Council, a nonprofit that disseminates information on the property and casualty insurance industry.

Mark Sektnan, vice president for state government relations for the American Property Casualty Insurance Association, said in a statement that the rule has "the real potential to delay the approval of rate filings, which will delay the availability of insurance products."

The association, he said, prefers a national approach as it is very difficult for national carriers to comply with complex disclosure requirements now under discussion in different states.

Erin Collins, a senior vice president of the National Association of Mutual Insurance Companies, said in a statement that the regulation could create an "insurance cost-driver" without "creating any meaningful benefit to the consumer."

"Regulation for regulation's sake is not consumer protection," Collins said.

A public hearing is set for 9 a.m. April 25. Participation is available via Zoom and in-person at the commission office, 5000 Capitol Blvd. SE, Tumwater.