NAMIC Foresees Rate Increases after Passage of R-67 in Washington State |
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Written by U.S. Insurance News
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Wednesday, 21 November 2007 |
The way Christian Rataj sees it, voters let their fear get the best of them.
The way Christian Rataj sees it, voters let their fear get the best of them.
That’s the best explanation Rataj, the Northwestern state affairs manager for the National Association of Mutual Insurance Companies (NAMIC), can give for why Washington voters passed Referendum 67, a measure that will allow triple damages to be assessed for “bad faith” denials of insurance claims.
“Washington state voters let fear prevail over fact this election year when they let the scare tactics of the trial bar lead them to ignore the facts surrounding insurer claims settlement practices and consumer claims experiences,” Rataj said.
As a result of passing the measure, which won with 57 percent of the vote, consumers will likely see their rates increase.
According to Rataj, the legislation would allow the filing of first-party bad faith lawsuits against carriers for punitive damages in cases where a carrier denies a claim and the policyholder believes that the settlement denial was simply “unreasonable,” including a “mere” unintentional technical violation of the Washington Administrative Code.
“It was much-less restrictive than other states, where claimants can only sue for denials that are willful, deceitful, or fraudulent,” Rataj said of R-67.
NAMIC is a member of Consumers Against Higher Insurance Rates, which presented “clear and irrefutable” evidence to Washington state voters that settlement disputes between insurers and policyholders are statistically rare, Rataj said. Current state law already protects consumers from unfair claims practices.
“Unfortunately, the insurance and business communities’ attempt to educate consumers about the truth and protect them from this ‘sugar-coated poison pill’ legislation was trumped by crafty lawyer misrepresentations about a couple of highly sensationalized, aberrational, and unrelated claims settlement disputes,” Rataj said. “It opens the door to frivolous lawsuits and will undoubtedly drive up insurers’ expenses, leading to rate hikes.”
Rataj is hopeful that Washington voters, like those in California, will learn soon that this measure “is nothing but an anti-consumer protection act that only helps trial lawyers redirect policyholder premium dollars to trial lawyer bank accounts.”
Two recent studies suggest R-67 will drive up costs. The state budget office said the law would increase rates for consumers, state agencies, and local governments. And the consulting firm Milliman, Inc., estimated the measure could cost Washington insurance consumers $650 million each year, which translates to $205 annually for an average family household.
In five states with similar laws, insurance rates went up, according to the Milliman report. It also said consumers could see rate increases of up to 7 percent per household.
Perhaps, though, rates won’t go up in Washington, at least permanently: Rataj promised that the fight against R-67 isn’t over.
“NAMIC will work with lawmakers and other stakeholders to repeal this law in the next legislative session,” he said.
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