A bill pre-filed in Washington state would require auto insurance policies to have right-to-appraisal clauses starting in 2025.
The bill would allow for an insurance company or policyholder to ask for an appraisal if the two parties can’t agree on the cash value or amount of loss on a damaged vehicle.
Each party will be allowed 10 days to hire an appraiser and notify the other party of its selection, the bill said.
“The selected appraisers shall appoint a competent and disinterested umpire,” the bill states. “If the appraisers do not appoint a competent and disinterested umpire within 15 days, either party may request that a judge of a court of competent jurisdiction select an umpire.”
The loss would be determined either by agreement of the two appraisers or by agreement of one appraiser and the umpire, the bill said.
Each party will pay for their appraiser and split the cost of the umpire.
“If the amount of loss determined through the appraisal process is greater than the amount of loss [the insurance company] adjusted before the appraisal process was invoked, [the insurance company] will reimburse [the policyholder] for the costs incurred for the appraisal process,” the bill said.
Appraisal costs could include the appraiser charges, attorney fees, and other necessary actual costs.
Additionally, the bill requires insurance policies to include language that amounts paid under the claim will cover the costs to restore a vehicle to its condition before the loss.
“Payment of a claim under a basic contract of automobile insurance for automobile physical damage must be based upon the reasonable and necessary costs at the claimant’s chosen repair facility,” the bill said. “The insurance company has the burden to prove the costs at the claimant’s chosen repair facility are unreasonable or unnecessary.”
Peterson previously told Repairer Driven News that the bill aims to fix customer and repair shop complaints about length claim processes caused by insurance cost disputes.
The bill is partly in response to concerns Jeff Butler, owner of Haury’s Collision & Vintage, shared with the legislator.
Butler sent a letter and petition to legislators earlier this month asking for auto insurance reform to protect businesses and the public against “unfair and deceptive practices” he says insurers are using through photo estimating, artificial intelligence (AI), and virtual claim processes.
In a May 2023 report from the Office of the Insurance Commissioner (OIC) of Washington State, the office also identified that “complaints against property and casualty are at historic level for the Consumer Advocacy Program.”
During a July 2023 OIC workshop, Washington Insurance Commissioner Mike Kreidler commented, “I believe we have some serious issues right now. We’ve seen a 63% jump in complaints about claims issues, on average… I know supply chain issues have caused some repair delays but I’m especially concerned with the increase in consumers with complaints about the claims experience that do not involve supply chain problems… Some of the most concerning issues we’re hearing involve the issue of the use of photo that can produce very little repair estimates. Actual human adjusters are not inspecting the damage and insurers are not thoroughly explaining why they disagree with a consumer’s repair estimates.”
Washington Independent Collision Repairers Association (WICRA) presented a survey of members about the impact of photo estimating on their businesses to the OIC in July. The association received 30 responses to its survey.
On average, the 30 independent shops said they see more than 1,000 photo estimates at their businesses each month. About 93% of auto claims were settled solely on the insurer’s review of photos.
Eighty percent of the shops said none of the photo estimates they reviewed were accurate.
Seventy percent of shops said they had to resubmit information to the insurer multiple times before receiving a response or payment.
Amidst mounting concerns, the National Association of Insurance Commissioners (NAIC) recently approved a model bulletin on the use of AI by insurance companies.
The “Model Bulletin on the Use of Artificial Intelligence Systems by Insurers” outlines the need for processes and controls to prevent possible AI inaccuracies, discriminating biases, and data vulnerabilities.
Washington recently proposed two bills to create a task force to study AI use in the state. It doesn’t specifically mention AI use by insurance companies as a concern.
Washington repair shops aren’t alone in their concern about the claim process. The Wisconsin Collision Repair Professionals (WCRP) recently met with insurance officials in their state raising similar alarm bells about insurers’ refusal to cover labor and repair costs.
Photo courtesy Sean Pavone/iStock