OLYMPIA — Washington Insurance Commissioner Mike Kreidler said insurers owe customers a clear explanation for every increase in their auto and home insurance premiums.
On Tuesday, he set out to ask for it.
Kreidler proposed new regulations requiring greater transparency of certain factors that drive up premium costs.
In particular, it says that insurers must “provide sufficient information, in terms understandable to the average policyholder, to enable the policyholder to know the nature of any premium increase.”
Kreidler said in a statement it was “pretty basic information you’d expect from your insurer, but we hear from hundreds of consumers every year who can’t get a straight answer about why they’re being charged more.”
Under the proposed rules, starting June 1, 2024, if the premium increase occurs when the policy is renewed, the company must provide a “reasonable explanation” to the policyholder after receiving a written request from the customer.
After June 1, 2027, the insurer must automatically disclose the reasons in writing when the premium increase is 10% or more. For smaller increases, the policyholder may submit a written request and the insurer must provide reasons.
The rule will apply to all property and casualty insurance in states that sell passenger car coverage and private homeowners, including coverage for production homes, condos, and renters. Health, disability, life and long-term care coverage will be waived.
Kreidler launched this rulemaking effort in February 2022.
The initial filing stated a lack of transparency “prevents insurance consumers from making informed decisions about their insurance policies, renewals, coverage, and prices. Allowing insurance companies to make rate changes or take adverse action against consumers who are at a serious disadvantage in these transactions, where there is also a lack of full disclosure, complete transparency, and fairness, results in unfair and deceptive trade practices.”
Commission staff held five meetings with interested parties on the proposal, the last of which took place last month.
Several factors are used to calculate auto or homeowner insurance ratings. This includes driving records, distance traveled, number of drivers, claims history, discounts, fees and surcharges, driver’s age, credit history, education, gender, marital status, occupation, age of property, and value.
Commission staff know that some insurance companies’ rating formulas have become so complicated, that they can’t easily determine the reason behind a change in someone’s premium. Some insurers’ computer systems can’t produce clear answers, the staff noted.
Underwriters say they want to make sure customers understand what’s going on, but the proposed mandate could make the process more complicated, they said.
“Our concern from the start with the premium change transparency rule was that it would end up requiring policyholders to wade through massive explanatory documents filled with equations and formulas better suited to actuaries and insurance regulators – rendering the information useless to consumers, by potential costs. hundreds of millions of dollars to insurance companies,” said Kenton Brine, president of the NW Insurance Council, a nonprofit that disseminates information about the property and casualty insurance industries.
Mark Sektnan, vice president of state government relations for the American Property Casualty Insurance Association, said in a statement that the rule has “a real potential to delay the approval of rate applications, which will delay the availability of insurance products.”
The association, he said, prefers a national approach because it is very difficult for national airlines to comply with the complex disclosure requirements now being discussed in various states.
Erin Collins, senior vice president of the National Association of Mutual Insurance Companies, said in a statement that the regulations could create “insurance cost drivers” without “creating meaningful benefits for consumers.”
“Regulation for the sake of regulation is not consumer protection,” said Collins.
A public hearing is set for 9 a.m. April 25. Participation is available via Zoom and in person at the commission’s office, 5000 Capitol Blvd. SE, Tumblr.
Jerry’s Cornfield: 360-352-8623; [email protected]; Twitter: @Two cities.