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Washington will require insurers to disclose the reasons for rate hikes

Insurers will soon have to give customers a clear explanation for the increase in the premium of their car and home insurance upon renewal.

From Saturday, companies must do this in writing if a policyholder requests it. By 2027, that information should be provided automatically and in easily understandable language in policy renewal notifications.

“If your insurance company is going to increase your premium, you have the right to know why,” Insurance Commissioner Mike Kreidler said in a statement. “Every year, hundreds of consumers have told us they can’t get a straight answer from their insurance company about why they’re paying more.”

Kreidler cited the number of consumer complaints when he started doing this in February 2022. The lack of clarity may hinder policyholders’ ability to decide whether to change or renew insurers. Making public reasons for an increase will promote fairness and honesty in transactions, he said.

The insurance industry is objecting to some of the requirements, arguing that the changes will needlessly drive up costs for insurers at a time when many premiums are already rising.

The new rule applies to all property and casualty insurers in the state that sell private auto and homeowners coverage, including coverage for manufactured homes, condominiums and renters. Health, disability, life and long-term care insurers would be exempt.

The changes will be implemented in two phases.

From Saturday, if there is a premium increase when renewing a policy, companies will have to provide a “reasonable explanation” as to why, in writing, if a customer requests it by post or email. Insurers must use terms “that are understandable to an average policyholder, allowing the policyholder to understand the fundamental nature of any premium increase,” the rule says.

Insurers should also let policyholders know that they can ask questions. This information must appear in 12-point bold type on the first page of renewal notices or billing statements. Companies have 20 days from receipt of a written request, by mail or email, to respond, according to the commissioner’s office.

After June 1, 2027, insurance companies will be confronted with additional requirements. They must send notice to policyholders by post or email at least 20 days before renewing a policy with a premium increase of 10% or more.

Each notice must identify the factors used in calculating the premium that contribute to the increase.

This includes the claims history, discounts, reimbursements and surcharges, but also the age, credit history, education, gender, marital status and profession of the policyholder.

With a car policy, companies can take into account driving behavior, miles driven, the number of drivers, the number of vehicles on the policy and where the car is kept.

With homeowners insurance, a property’s age, location and value are among the variables used in calibrating a premium.

Insurers initially pushed back on Kreidler’s proposal, saying it would require consumers to wade through massive formulas and equations used to set rates. They still believe that what the new rule requires in 2027 goes too far.

This first round of changes, starting Saturday, will give policyholders “the right amount and detailed information” needed to make informed decisions, said Kenton Brine, president of the NW Insurance Council, a nonprofit information organization. property and casualty insurance industry.

In the second phase, he said, customers will receive “detailed detailed premium information whether they ask for it or not.” He called it “excessive” and said it would increase compliance costs for insurers “with little or no additional benefit to most consumers.” The council called on the insurance commissioner to reconsider this.

“Preparing for this rule change has been costly and time-consuming for insurers at a time when costs are rapidly escalating – costs that are leading to much higher premiums for drivers, renters and homeowners,” Brine said.

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