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Referendum 67, which Washington voters approved in November, came into law in December, but industry representatives say it will be several months, maybe a few years even, before consumers will start seeing rate increases.
R-67 was a referendum on a legislative bill (ESSB 5726) prohibiting insurance companies from “unreasonably denying” certain claims. Opponents say R-67 will give lawyers incentives to sue insurance companies because it will allow triple damages for denied claims.
Insurance agents approached by the Kitsap Peninsula Business Journal said they weren’t allowed to comment. Representatives from the American Insurance Association deferred the expected fallout to a study conducted by research company Milliman Inc. (based in Milwaukee, Wisc.) on behalf of Consumers Against Higher Insurance Rates, a group that was organized to oppose R-67. The study showed that for an average Washington state family, insurance rates are likely to go up $205 per year. The study estimated the total cost to consumers to exceed $650 million per year for auto, property and liability claims.
“We’ll likely see an increase in the number of lawsuits filed, and likely we’ll see an increase in the cost of insurance — but of course, like with all things, those costs will take a while before they start to appear,” said Dana Childers, spokesperson for the Reject R-67 campaign. “Right now we have a ‘wait and see’ approach.”
The state Office of Financial Management also performed a fiscal analysis, but concluded that there was no clear guidance on estimating the magnitude of the impact because the various studies conducted had conflicting results. OFM is estimating the impact to the state’s courts would exceed $50,000 per year, and that 300 notices per year related to insurance lawsuits would be filed with the Office of the Insurance Commissioner, resulting in a minimum cost to that agency of $50,000 per year.
Nicole Mahrt, public affairs director for the American Insurance Association, said it will likely take a year, possibly even two to three years, before consumers feel the effect of R-67 on their premiums. She said flyers started appearing from the bar association right after the law passed advertising training in the new law. “The legal community is exciting about it,” she said. “We expect you’re going to see more lawsuits filed because there’s an incentive to have them filed — now you can get triple damages; there will be more lawsuits settled, and easier settled. All of that will translate into costs.”
The new law will not impact health-care insurance. Dr. Brian Wicks, president of The Doctors Clinic and recently elected president of the Washington State Medical Association, said the ads by the Approve 67 campaign were deceptive when they implied medical claims would be denied, because consumers would associate medical claims with health insurance, and health insurance plans are specifically excluded from the law.
“The referendum will not increase health insurance costs… The Legislature said (lawyers) can’t sue (health) insurance companies, but can sue property and casualty companies.”
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