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WA Insurers Now Required to Explain Rate Hikes to Customers
Starting Saturday, June 1st, 2024, Washington insurers must provide clear explanations for any increases in auto and home insurance premiums at the time of renewal if policyholders request them. By 2027, these explanations will be included automatically on renewal notices and written in easy-to-understand language.
Insurance Commissioner Mike Kreidler emphasized the importance of transparency, stating, “If your insurance company is going to increase your premium, you have a right to know why.” This change comes after numerous complaints from consumers who struggled to get clear answers about rising premiums.
Providing this clarity will help policyholders make informed decisions about renewing or switching insurers. Kreidler believes that transparency will promote honesty and fairness in the insurance industry.
However, the insurance industry has raised concerns. They argue that the new requirements could drive up costs unnecessarily, significantly when premiums are already rising. The rule applies to all property and casualty insurers in Washington offering private passenger auto and homeowner coverage, including for manufactured homes, condominiums, and renters. It does not apply to insurers of health, disability, life, or long-term care policies.
Implementation in Two Phases
The changes will be rolled out in two phases. Starting Saturday, insurers must write a “reasonable explanation” for any premium increase upon request. This explanation must be understandable to the average policyholder and help them grasp the fundamental reason behind the rate hike. Insurers must also inform policyholders of their right to request this information, prominently displayed in 12-point bold font on the first page of renewal notices or billing statements. Companies have 20 days to respond to such requests.
From June 1, 2027, the requirements become more stringent. Insurers must notify policyholders at least 20 days before renewing a policy with a premium increase of 10% or more. These notices must list the factors contributing to the premium hike, including claims history, discounts, fees, surcharges, and personal details such as age, credit history, education, gender, marital status, and occupation. For auto policies, driving records, miles driven, the number of drivers and vehicles, and the car’s location are also considered. For homeowner insurance, factors like the property’s age, location, and value will be included.
Industry Pushback
The insurance industry has resisted these proposals, arguing that they will burden consumers with overly complex information. They maintain that the 2027 requirements, in particular, are excessive and will increase compliance costs without providing significant consumer benefits.
Kenton Brine, president of the NW Insurance Council, expressed concerns about the impact of these changes. He noted that the initial round of changes would provide policyholders with sufficient information to make informed decisions. However, he criticized the second phase for being overly detailed and costly for insurers, with little added benefit to most consumers. The council has urged the insurance commissioner to reconsider the 2027 requirements.
According to Brine, insurers have already spent a considerable amount of money and time preparing for these changes, which has contributed to higher premiums for drivers, renters, and homeowners.
Do you think this is a good thing for the residents of WA?