SENATE BILL REPORT

SHB 1320

BYHouse Committee on Financial Institutions & Insurance (originally sponsored by Representatives Lux, Chandler, Nutley, Betrozoff, Peery and Meyers; by request of Office of Insurance Commissioner)

Revising provisions on the cancellation and renewal of insurance policies.

House Committe on Financial Institutions & Insurance

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 18, 1988

Majority Report:  Do pass as amended.

      Signed by Senators von Reichbauer, Chairman; West, Vice Chairman; Johnson, Kreidler, McCaslin, Rasmussen, Sellar.

Senate Staff:Walt Corneille (786-7416)

                  February 18, 1988

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, FEBRUARY 18, 1988

BACKGROUND:

If an insurance policy is cancellable at the option of the insurer, a cancellation may only be accomplished by giving written notice to the insured and his or her representative in charge of the subject of the insurance 45 days before the effective date of cancellation.  This requirement applies to cancellation of binders for such policies as well.  These requirements do not apply to contracts of life or disability insurance which do not contain a provision allowing cancellation prior to the date premiums have been paid or to policies procured by insurers not authorized by the Commissioner to solicit business in this state.  Like notice of not less than 45 days must also be sent to a mortgagee, pledgee or other person shown to have an interest in any loss (loss payee) that may occur.  This can create a situation where the loss payee receives a notice of cancellation prior to the insured.

An insurer is required to renew a contract of insurance unless:  (1) the insurer gives at least 45 days written notice of the nonrenewal; or (2) at least 20 days before the expiration date the insurer, in writing to the insured and his or her representative, indicates a willingness to renew the contract along with a statement of the new premium, and the insured fails to pay the premium when due; or (3) the insured's agent has procured other coverage acceptable to the insured.

A renewal must be based on forms and rates applicable to the existing policy unless 20 days advance notice of a change in rates or contract provisions is given.

In 1986 the Legislature enacted a provision requiring that notice of cancellation or nonrenewal be sent to the agent or broker as well as the insured.  Existing language requiring notice to the insured's representative creates an additional requirement.

SUMMARY:

Cancellation provisions applicable to binders apply only to binders which do not contain a clearly stated expiration date.  The requirement that notice of cancellation or nonrenewal be sent to the insured's representative is stricken. 

The required notice of an insurer's willingness to renew a contract may be sent either directly by the insurer or through its agent.  Any insurer failing to include in a notice of renewal the increased premium or explanation of any change in the contract provisions must renew the policy according to the rates and contract provisions that apply to the existing policy.  Where there is a renewal based on rates and contract provisions in the existing policy the insurer may make a change in the rates and/or contract provisions once during the renewal term if 20 days advance notice is given. 

The notice requirement to the loss payee is made the same as that of the insured.

SUMMARY OF PROPOSED SENATE AMENDMENT:

The requirement that notice of cancellation and nonrenewal be sent to the insured's agent or broker is extended to notices of an offer to renew.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Effective Date:September 1, 1988

Senate Committee - Testified: David Rodgers, Chief Deputy Insurance Commissioner (pro); Frank Keller, Agents and Brokers (pro); Basil Badley, AIA (pro); Len Brevik, IIAW (pro)