The Washington Senate approved a bill allowing the insurance commissioner to require carriers to pay restitution directly to policyholders for code violations.
Lawmakers also passed a separate bill directing a study on the impact of credit history on insurance premiums, according to a report from AM Best. Both measures align with the priorities of Insurance Commissioner Patty Kuderer, who described them as beneficial for policyholders.
“These consumer protection bills take important steps to hold insurance companies accountable for how they treat their policyholders and how my office is able to enforce violations of our insurance laws,” Kuderer said in a statement.
According to Kuderer, the restitution bill provides policyholders with a way to recover losses without going through the court system. Under current regulations, fines collected by the insurance commissioner go into a general fund rather than compensating affected policyholders.
“As the new insurance commissioner for Washington state, I don’t believe we should be passing people off to seek help in the already clogged court system when we could be providing restitution directly,” Kuderer said.
The bill also increases the maximum fine for property/casualty carriers from a total of $10,000 to $10,000 per violation, aligning with penalties applied to health insurers, according to the commissioner’s office.
Insurance trade groups have not opposed the restitution provision, as carriers frequently negotiate penalties with the Office of the Insurance Commissioner. However, some in the industry have raised concerns about the new per-violation fine structure.
Kenton Brine, president of the Northwest Insurance Council, said the provision could result in significant financial penalties.
For example, some carriers have made billing errors affecting thousands of policyholders. In those cases, insurers typically agree to pay fines above $10,000 and issue refunds to affected consumers, Brine said.
“At a minimum, we believe legislation should differentiate between willful, intentional conduct by an insurance company — with higher penalties attached — and unintentional errors,” Brine said. “We hope to see such a change considered in the House as the bill moves forward.”
The Senate also passed a bill directing the insurance commissioner’s office to study credit history, credit-based insurance scores, and other rating factors that may have disproportionate effects on policyholders. The study would assess how these factors influence premiums and explore potential alternatives insurers could use instead of credit history.
During committee discussions, some lawmakers suggested an independent third party conduct the study to ensure objectivity and proposed narrowing its scope to focus only on credit history. The Northwest Insurance Council supported these amendments, but both were rejected.
Efforts to limit the use of credit-based factors have been a focus for regulators in Washington. Former Insurance Commissioner Mike Kreidler previously attempted to ban the practice but was unsuccessful.
“We heard senators question the need for a study, given Washington’s very recent ‘real-life’ experience with banning the use of credit information for rating personal lines insurance policies in 2021, which resulted in unsustainable premium hikes for tens of thousands of lower-risk insureds, including thousands of retired seniors in the state,” Brine said.
The Senate also approved a technical bill removing outdated language, along with a measure transferring responsibility for collecting fire loss insurance data from the state fire marshal to the insurance commissioner’s office.
The bills now move to the state’s House of Representatives, where they must pass by April 16, according to the commissioner’s office.
