Washington OIC fields praise and complaints about proposed claims handling rule changes during meeting

Advocates for Insurance companies argued rule changes proposed by the Washington Office of the Insurance Commissioner (OIC) would scare insurers from writing in the state during a meeting Thursday, while consumer attorneys and repair experts said the changes protect the consumers. 

The OIC says it has proposed the changes because of an uptick in consumer complaints in recent years. 

“The spike in consumer complaints and lawsuits against insurers indicates potential insurance code violations,” a notice for the meeting says. “In the midst of a changing technological and workforce environment, rulemaking may update and clarify requirements to maintain a fair claim environment for consumers that will provide transparency into the decisions that affect their financial recovery.”

Many of those who spoke during Thursday’s zoom meeting briefly touched on areas of concern but added they would be submitting a more extensive written testimony by the Aug. 8 deadline. Comments can be sent to [email protected]. 

Steve Soha, with Soha & Lang, said he focuses on insurance coverage law and has concerns about rules imposing obligations on the third-party claimant. 

“When you look at the definition of claimant, notice of the claim now means notice by a third-party claimant,” Soha said. 

The rule change redefines notification of a claim to an insurance company to include notifications made by third-parties. 

“I don’t think first party and third party claimants have been explained enough in the statute,” Soha said. “On a drafting level there needs to be some clarification of what it is and what are the obligations, which is now defined as a third-party claimant.” 

Soha also said he has concerns about the narrowing of the dates for insurance responses. 

If the OIC finalizes the rule changes, insurers would be required to acknowledge receipt of a notice of a claim within five business days, or within 10 business days under a group insurance contract. Currently, insurance companies have 10 days for individual claims and 15 days for business claims. 

It would also require insurance companies to respond to estimates, supplements, and final bills within three days. Previously, insurers had 10 days to respond to each.

Justin Lewis, president of the Washington Independent Collision Repair Association (WICRA), previously said some insurers in the state push it to the 10 days for each stage in the claims process. 

“So the 30-day rental coverage is exhausted after a preliminary estimate, supplement, and a final bill,” Lewis said. “We don’t even touch the car, and the rental coverage is expired, just trying to wait for insurers.”

Ryan Hesselgesser, shareholder with Forsberg & Umlauf, said he feels the changes impose a significant burden on insurance companies. 

“My personal concern is that insurance will potentially not be writing in the market anymore,” Hesselgesser said. “I’m not sure what the basis of this was, because this code is typically uniform across multiple jurisdictions. I’m not aware of other jurisdictions that are going for this type of language, and I would be interested to know from the insurance commissioner whether that is the case, or whether this was a product of the National Association of Insurance Commissioner meeting or anything like that.” 

He said is biggest concern revolved around wording regarding “emergency repairs.” 

In the proposal, failure to accept a first-party claimant’s emergency mitigation invoice would be considered an unfair claims settlement practice. Emergency mitigation is defined as actions necessary to stabilize the loss such as boarding up or tarping a roof. 

Hesselgesser said he thinks the wording could enable or increase fraud and be used to heighten repair costs. 

He said this increased when a repair has to be approved within three days. 

“Oftentimes, that’s not even how it happens,” Hesselgesser said. “You don’t really approve a repair before it happens. It’s an invoice after the fact.” 

He questioned if there’s been a study to look at increased repair costs. 

“I know that is an issue with insurance companies and just what I’ve seen in litigation, and frankly, some of them are repeat offenders, it’s a lot of the same people,” Hesselgesser said not necessarily clarifying who he was speaking about but seemingly alluding to repairers. “So there are really good companies out there, but my concern is that it enables repeat offenders to, unfortunately take advantage of insurance more than what I’ve already seen.” 

Kenton Brine, Northwest Insurance council, spoke to concerns regarding why the OIC decided to do the rewrite of the rule. 

He said data about increased complaints doesn’t take into account changes in the market. He said claims plummeted in 2020 but quickly rose in the years following. 

There has also been an outside increase in repair cost inflation that has impacted premiums, Brine said. 

“We have to recognize that this is a unique time,” Brine said. 

Brine said he has concerns about the ambiguous use of multiple words in the rule, including third-party. He said the word “inquiry” seems to replace “claim” at times in the rule change and the word “denial” is used but it’s unclear if the draft intends to use the word “refusal.” 

Terms like database, survey and estimating process also are not defined, Brine said. 

Under the rule changes, insurers would be required to provide the database or survey it uses to decide either material pricing, labor rate, or both, upon the request of the claimant. It should include where the data was collected, which businesses provided the data, and whether the business will honor the price provided if the insured were to consider using them. 

Lewis said this could provide some transparency in how insurance companies complete surveys.

“Industry concern has been raised by the potential of selective rate surveying,” Lewis said.

Brine also argued against changes in the rule that would require insurance company to notify claimants prior to using photo estimating, and to inform claimants that they can request an in-person inspection of their vehicle. Insurers would not be able to require photo-based estimating as a condition of coverage.

“This is something that is currently in process and that is very popular with insurers, isn’t the fact that insurers use that process sort of a defacto,” Brine said. 

McKean Evans, an attorney at Ruiz and Smart, said he represents mostly homeowners and property claims. 

“We view these proposals as a pragmatic solution for a lot of issues that we see our clients face,” Evans said. “My perspective is regulations level playing field between the unsophisticated homeowner dealing with a loss and the sophisticated carrier with the knowledge and the resources and the personnel.” 

The specific rules around timelines for addressing mitigation claims is encouraging, he said. He said it is critical to start many repairs on a home immediately. 

Evans also praised the rule changes that would make databases and surveys open to the consumer. 

Melissa Murray said she’s held multiple roles in the state in the collision repair industry. She said she often hears consumer complaints about photo estimates. 

“The regular consumer doesn’t have experience with what these insurance companies are looking for, what damage might or might not go in those photos,” Murray said. “Photo estimates don’t always capture all of the damage, when you are talking about the regular consumer, what damage might or might not show in those photos and also safety systems.” 

Murray also said that often times insurance companies argue that changes in the law would raise premiums. 

“I haven’t seen anything outside of what a reasonable company would be doing to protect their insured,” Murray said about the rule changes. 

She also argued that insurance companies have profited largely in recent years, she said partly due to photo estimating.

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Photo courtesy of the Washington OIC.