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Karl Newman, President
Sandi Henke, Communications Director     
NW Insurance Council
Phone: (206) 624-3330/(800) 664-4942
Fax: (206) 624-1975
Follow at Twitter/nwinsuranceinfo

Insurance 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 regulators.

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 and Oregon.

NW Insurance Council is a nonprofit, public-education organization funded by member insurance companies serving Washington, Oregon and Idaho.