Washington State Requires Insurers to Better Explain Auto, Home Rate Increases

Home and auto insurers in Washington state will have to provide renewing policyholders with specific reasons why their premiums are increasing under a new rule from the state’s Office of the Insurance Commissioner.

The rule takes effect in two phases. The first, effective June 1, 2024, requires insurers to place a disclaimer at the beginning of renewal notices or billing statements notifying policyholders that they can request, in writing, details about increased premiums. The second takes effect June 1, 2027, and requires insurance companies to automatically send the notice at least 20 days before policy renewal dates when the policy rate will increase by 10% or more.

“If your insurance company is going to increase your premium, you have a right to know why,” Insurance Commissioner Mike Kreidler said in a news 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.”

Clearer explanations for rate increases

Insurance companies use numerous data points — or “rating factors” — to determine premiums for home and car insurance. For example, a home’s age, location, claims history, value, and more influence home insurance premiums. A driver’s age, gender, credit history, driving record, and more affect auto insurance premiums.

Going forward, insurers in Washington state will have to share with policyholders the specific rate and rating factors causing their premiums to increase. And they’ll have to do it “in terms that are understandable to an average policyholder, which enable the policyholder to figure out the basic nature of any premium increase,” the rule requires.

The rule also sets out language for increase notices, which must include:

• The original premium amount and increased amount

• The specific factor or factors driving the increase

• A clear explanation of each factor

• The percentage or dollar change to the renewing premium

• Contact information for the insurer, including phone, email, postal address, or web address

Insurance costs in Washington

Compared to other states, Washington has moderate home and auto insurance costs. The average cost of home insurance in the state is $1,437 annually, according to Insurify data. By comparison, the national average cost of home insurance is $2,377. Floridians pay the most for home insurance — $10,996, on average — while Vermont homeowners pay the least, at just $918 per year.

Washington’s average car insurance costs, on the other hand, are higher compared to most other states. The average cost of a minimum-coverage policy in Washington is approximately $121 per month, while full-coverage policies average $189 monthly, Insurify data shows. Nationally, car insurance averages about $105 monthly for a liability-only policy and $215 for full coverage.

What’s next: Penalties for insurers

The first phase of the rule is already in effect, and insurers have another three years to comply with phase two. Currently, insurers have 20 days to respond to a policyholder’s request for an explanation, whether they receive it through postal mail or email.

As of June 1, 2027, homeowners and auto insurers will need to send a notice at least 20 days before a policy’s renewal date if the premium will increase by 10% or more.

Insurers that fail to comply with the new rule could face fines and penalties.