A new rule from the Washington Office of the Insurance Commissioner will require insurance companies to let policyholders know why their premiums have increased, according to a press release. 

The first phase of Insurance Commissioner Mike Kreidler’s Premium Change Transparency Rule started June 1. A second phase will begin June 1, 2027. 

“If your insurance company is going to increase your premium, you have a right to know why,” Kreidler said in the release. “Hundreds of consumers, every year, have told us they are unable to get a clear answer from their insurance company about why they’re being charged more. This is pretty basic information that should be available, and now it will be.” 

During Phase 1, insurers have to include a disclaimer on the first page or view of renewal notices or billing statements that let policyholders know they can request more details about their premium increase. 

The information must be in 12-point bold font and include contact information. 

Insurers who receive requests by mail or email from policyholders are required to respond with a reasonable explanation for the premium increase within 20 days of being contacted. 

During Phase 2, insurers will be required to send a notice at least 20 days prior to renewing a policy with a 10% or more increase. 

The notice must include a clear explanation and include the primary factors that caused the increase. This could include claims history, discounts, fees and surcharges, premium capping, base rate changes, and demographic factors such as policyholder’s age, credit history, education, gender, marital status, and occupation, according to the news release.

Auto insurance could include additional factors such as the vehicle’s garaging location, driving record, miles driven, the number of drivers, and the number of vehicles on the policy. 

The rule states its purpose is to create transparency. It further says the commissioner has received numerous complaints from policyholders about premium increase explanations provided by their insurers. 

The U.S. Bureau of Labor Statistics (BLS) recently reported the motor vehicle insurance index rose nationwide by 1.8% in April after rising 2.6% in March. Auto insurance is mentioned as an item that had a notable increase of 22.6% over the past year. 

Multiple media agencies have reported that it is the largest annual increase for auto insurance since 1979. 

Insurers also tend to point to rising labor costs and used car values as causing the hiked rates in recent years. However, the hikes continually receive criticism from consumer advocacy groups who’ve claimed insurers are overstating needs and overburdening the consumer. 

As insurers raise premiums, collision repair shops have simultaneously noted an increase in consumer responsibility for out-of-pocket expenses due to short payments. 

Federal Reserve Chair Jerome Powell mentioned the cost of insurance on inflation during testimony to the Senate Banking, Housing and Urban Affairs Committee earlier this year. 

“It is clear that insurance of various different kinds, housing insurance but also automobile insurance and things like that, that’s been a significant source of inflation over the last few years, and it’s to do with a million different factors,” Powell said during the hearing held March 7.

Insurance also remained one of the top industries that spent money on lobbying in 2023. It only trailed behind the pharmaceutical and electronics manufacturing industries, according to data released by Statista.

IMAGES

Photo courtesy of alexsl/iStock