claim costs jump more than $200 million in Washington
SEATTLE - Insurance claim costs for Washington
residents have increased by more than $200 million over a
two-year period, according to a new
study released by the Insurance Research Council (IRC).
An estimated $190 million of the increase is attributed to
effects on Homeowners
Insurance claims due to the Insurance Fair Conduct Act,
commonly known as R-67. Key factors include insurers limiting
fraud investigations and paying questionable claims rather
than risk potentially unlimited punitive damages.
"This study provides strong evidence that
there has been a negative impact on insurance claim costs,"
said Karl Newman, NW Insurance Council president. "Unfortunately,
increased claim costs are paid from policyholder premiums
and reserves and can lead directly to higher insurance bills
for Washington residents. In a difficult economy this is exactly
what most of us don't want to see happen."
At the same time, a recent analysis by
the National Insurance Crime Bureau shows questionable
claims in Washington have spiked 9.3% since 2008 - increasing
for three consecutive years. Stopping fraudulent and inflated
claims is in the best interest of the public because policyholders
pay these costs in the form of higher rates.
"We believe the citizens of Washington
state deserve to know the ongoing impact of public policy
changes," said Newman. "This type of feedback helps voters
make informed choices in future voting opportunities and helps
legislators as they evaluate future changes to liability laws."
Increased claim costs were predicted by
those opposed to the law. Opponents deemed it unnecessary
because insurance policyholders in Washington already had
legal recourse under state law prior to R-67 and insurance
companies have had ongoing strong oversight from state insurance
The study showed the largest increase was
in Homeowners insurance claims, tacking on more than $190
million in excess claims costs. An additional $17.4 million
is indicated for Uninsured Motorist claims. The impact on
Personal Injury Protection claims could not be determined.
IRC found that implementation of R-67 was
associated with a dramatic increase in dollars paid per Homeowners
claim (severity), beginning soon after enactment of the new
law. For Uninsured Motorist claims the increase was attributed
to a higher than expected number (frequency) of claims.
In the study, IRC looked at insurance claims
costs in four states that continue to have laws similar to
Washington's pre-R-67 laws. IRC then compared those states'
claims costs to claims costs in Washington state, both before
and after R-67. Although average Homeowners claim payments
increased in the control group of states, the average increase
in Washington was 17 percentage points greater. The states
included in the control group were Arizona, Nevada, New Mexico
Insurance Council is a nonprofit, public-education organization
funded by member insurance companies serving Washington, Oregon