Transparency shouldn't cost you more

Insurance Commissioner Mike Kreidler is considering a change to the state’s recently adopted premium change transparency rule. A press release from the Office of the Insurance Commissioner says, “The change would be specific to Phase 2 of the rule — the automatic inclusion of reasons for premium increases in policy renewals — and would move the timing of that action from June 2027 to June 2029.”

Goodish? The rule applies to auto and home insurance policies. (Insurers of health, disability, life and long-term care are exempt from compliance.) It was driven by consumer complaints to the insurance commissioner about premium increases and the premium-increase explanations provided by insurers. But the rule is something that could harm both insurers and consumers, not help. It should be reconsidered.

During the first phase, which is now in effect:

“Insurance companies must include a disclaimer on the first page or view of renewal notices or billing statements that lets the policyholder know they can request more details about their premium increase.” The insurance company has 20 days to then deliver “a clear, concise statement, in writing, providing a reasonable explanation for the premium increase.”

OK. Doable.

During the second phase, which was to begin in June 2027, companies must send a notice at least 20 days before renewing a policy with a 10% (or more) increase and provide the primary factors causing the increase. Factors can be many and different for each policy holder.

“Failure to provide the premium change transparency required by this chapter is hereby defined as an unfair and deceptive practice in the business of insurance under chapters 284-30 WAC and 48.30 RCW,” the rule says.

“This transparency rule is important to consumers and insurers alike and is helping people get clear answers about why they are paying what they pay for insurance,” Kreidler said.

Companies already give information to consumers who call asking why their insurance is increasing, as they should. Insurers without good answers get dumped. Even when insurers have good answers, consumers shop around and try to find better rates. It’s on my to-do list right now.

Auto and home insurance have increased dramatically thanks to natural disasters, storms, more vehicle accidents, rising home construction prices, auto repair costs and government regulation. Remember when Kreidler interfered with insurers using credit scores in working up consumer rates? A judge found that Kreidler exceeded his authority banning credit scoring when there was a specific state statute that allowed insurers to use it. In an affidavit to the court, Sen. Mark Mullet, D-Issaquah, said, “Policy choices such as considering whether social concerns justify banning an actuarial sound insurance practice are uniquely the province of the democratically elected legislature.”

Insurers have welcomed the OIC proposal to delay the implementation of the next phase of the transparency rule. As a writer wrote in Insurance BusinessMag.com, “The cost to insurers to comply with Phase 2 could reach tens of millions, or even hundreds of millions of dollars.”

The goal of cost transparency is to lower costs, increase competition and create more informed consumers. If a government’s transparency rule promises to increase the price of insurance, it’d be best to reconsider.

OIC should evaluate how Phase 1 is working in getting consumers the information they want before adding more regulations.

— Elizabeth New is the director of the Center for Health Care and Center for Worker Rights at the Washington Policy Center. Email her at [email protected].