OLYMPIA — Washington Insurance Commissioner Mike Kreidler says insurers owe customers a clear explanation for any increases in their auto and home insurance premiums.
On Tuesday, he set about demanding it.
Kreidler proposed a new regulation requiring greater transparency into specific factors that drive up the cost of a premium.
Specifically, it states that insurers must “provide sufficient information to be understandable by the average policyholder and to enable the policyholder to ascertain the basic nature of a premium increase”.
Kreidler said in a statement it’s “pretty basic information you should expect from your insurance company, but we hear from hundreds of consumers every year who don’t get a straight answer as to why they’re being charged more.”
Under the proposed rule, from June 1, 2024, companies will be required to provide policyholders with “reasonable explanations” upon written request from customers when a policy renewal involves a premium increase.
After June 1, 2027, insurers must automatically provide the reasons in writing for a premium increase of 10% or more. For smaller increases, a policyholder can submit a written request and the insurer must justify it.
The rule would apply to all property and casualty insurers in the state that sell personal auto and homeowners insurance, including prefab, condo and rental insurance. Exceptions would be health, disability, life and long-term care insurers.
Kreidler started this regulation in February 2022.
The initial filing states the lack of transparency “prevents the insurance consumer from making informed decisions about their insurance policies, renewals, coverage and pricing. Allowing insurers to change rates or take adverse action against consumers who are significantly disadvantaged in these transactions, which also lack full disclosure, full transparency and fairness, leads to unfair and deceptive trading practices.”
Commission officials held five meetings with interested parties on the proposal, the last of which took place last month.
Several factors are used to calculate an auto or homeowner insurance rating. This includes a logbook, mileage, number of drivers, claims history, discounts, charges and surcharges, driver’s age, credit history, education, gender, marital status, occupation, age of ownership and value.
Commission officials learned that some insurers’ valuation formulas had become so complex that they could not readily state the reasons for an individual’s premium change. Some insurers’ computer systems are unable to generate a clear answer, the staff noted.
Insurers said they want to make sure customers understand what’s going on, but the proposed mandate could complicate the process, they argued.
“Our concerns with the premium change transparency rule from the start have been that policyholders would end up trawling through massive explanatory documents containing equations and formulas better suited to actuaries and regulators – rendering the information useless to consumers at the potential cost in the hundreds of millions dollars to insurers,” said Kenton Brine, president of the NW Insurance Council, a nonprofit organization that disseminates information about the property and casualty insurance industry.
Mark Sektnan, vice president of state government relations at the American Property Casualty Insurance Association, said in a statement that the rule “has real potential to delay the approval of rate claims, which will delay the availability of insurance products.”
The association, he said, prefers a national approach as it is very difficult for national airlines to comply with the complex disclosure requirements currently being discussed in different states.
Erin Collins, 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 for the consumer.”
“Regulation for regulation’s sake is not consumer protection,” Collins said.
A public hearing is scheduled for April 25 at 9:00 am. Participation is via Zoom and in person at the Commission Office, 5000 Capitol Blvd. SE, Tumwater.
Jerry Cornfield: 360-352-8623; [email protected]; Twitter: @dospueblos.
