HOUSE BILL REPORT

ESSB 5704

BYSenate Committee on Financial Institutions (originally sponsored by Senators Metcalf and Talmadge)

Requiring information to be filed with insurance rates.

House Committe on Financial Institutions & Insurance

Majority Report:  Do pass with amendment.  (9)

      Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Crane, Day, Dellwo, P. King, Meyers, Nutley and Winsley.

House Staff:John Conniff (786-7119)

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

APRIL 3, 1987

BACKGROUND:

The insurance commissioner must review and approve property and casualty insurance rates before insurers may use the rates.  In calculating a rate, insurers must consider the past and prospective loss experience both inside and outside Washington state for the type of coverage being rated.  If the rate is for fire insurance, insurers must consider at least the last five most recent years fire loss experience.  This second requirement is intended to smooth the sometimes sharp differences in experience from year to year.  If the insurer has not submitted sufficient information, the commissioner may require the insurer to submit the information upon which the insurer calculated the rate.

Automobile insurance companies currently offer "personal injury protection" coverage which is a form of medical coverage that pays for the insured's medical expenses, loss of wages, and loss of services.  The benefits are provided without regard to fault in an accident and are provided subject to dollar limits and time limits.  For example, a typical coverage may provide up to ten thousand dollars of benefits for all costs incurred within one year of the automobile accident.

The insurance code does not contain an explicit provision authorizing the insurance commissioner to regulate such coverage nor does the code require insurers to offer such coverage to policyholders who wish to purchase such coverage.  Recently, the commissioner issued regulations requiring insurers to offer greater limits of coverage to policyholders willing to pay for benefits.  An insurance company has sued the commissioner challenging the commissioner's authority to adopt such regulations in the absence of a specific statutory grant of authority.  The case is currently pending before the Washington State Supreme Court.

SUMMARY:

BILL AS AMENDED:  When considering the past and prospective loss experience for a particular coverage, insurers must consider at least five years worth of loss experience; however, insurers need only consider three years of loss experience when calculating private passenger auto insurance rates.  In addition, insurers may use the loss experience from other states similar to Washington, only if Washington loss experience is not available or not statistically credible.

Insurers must submit sufficient information for the commissioner to review a proposed rate.

Motor vehicle liability insurers must offer personal injury protection benefit coverage in every private passenger automobile insurance policy unless the named insured or spouse rejects such coverage in writing.  Motor vehicle liability policy and insured are defined.

Such coverage must provide at least $2,000 in benefits for funeral expenses, at least $10,000 in benefits for loss of income, and at least $5,000 in benefits for the loss of the insured's services.  Such coverage need not be provided for commercial "umbrella" liability policies, and motorcycle policies and such coverage may not be "stacked" by the policyholder in order to double the coverage.

AMENDED BILL COMPARED TO ENGROSSED SUBSTITUTE:  Insurers are required to provide personal injury protection coverage in auto insurance policies unless rejected by the policyholder.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Prime Sponsor.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The provisions of this act concerning insurance rates should moderate the sharp increases and decreases in insurance rates that characterize the "underwriting cycle".

House Committee - Testimony Against:      None Presented.