Can’t figure out why your car insurance has gone up? That may change

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

On Tuesday he went to claim it.

Kreidler proposed a new regulation requiring greater transparency of specific factors that drive up the premium price.

Specifically, it says that insurers must “provide sufficient information, in ways that are understandable to the average policyholder, to enable the policyholder to understand the basic nature of any premium increase.”

Kreidler said in a statement that this is “pretty basic information you should expect from your insurance company, but we hear from hundreds of consumers every year who can’t get a straight answer as to why they’re being charged more.”

Under the proposed rule, effective June 1, 2024, if a premium increase occurs upon policy renewal, companies must provide policyholders with “reasonable explanations” upon receipt of a written request from the customer.

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

The rule will 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. Health, disability, life and long-term care insurers would be exempt.

Kreidler launched this rulemaking effort in February 2022.

The original filing stated that the lack of transparency “prevents the insurance consumer from making informed decisions about their insurance policies, renewals, coverages and prices. Allowing insurers to make price changes or take adverse action against consumers who are significantly disadvantaged in these transactions, which also lacks full disclosure, full transparency and fairness, leads to unfair and deceptive trade practices.

Commission staff held five meetings with stakeholders on the proposal, the most recent of which took place last month.

Several factors are used to calculate an auto or homeowner’s insurance rating. These include driver’s license, kilometers driven, number of drivers, claim history, discounts, fees and surcharges, driver’s age, credit history, education, gender, marital status, occupation, property age and value.

Commission officials have learned that some insurers’ rating formulas have become so complex that they cannot easily pinpoint the reasons for a change in someone’s premium. Some insurers’ computer systems are unable to generate a clear answer, staff noted.

Insurers said they want to make sure 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 will end up requiring policyholders to wade through massive explanatory documents full of equations and formulas better suited to insurance actuaries and regulators — making the information useless to consumers, at the potential cost of hundreds of millions of 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 Sectnan, vice president of state government relations for the Casualty Insurance Association of America, said in a statement that the rule has “the real potential to delay the approval of rate statements, which will delay the availability of insurance products.”

The association, he said, prefers a national approach because it is very difficult for national carriers to comply with the complex disclosure requirements now being debated in various 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 consumer benefit.”

“Regulation for regulation’s sake is not consumer protection,” Collins said.

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

Jerry Kornfield: 360-352-8623; [email protected]; Twitter: @Two cities.

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