Washington Insurance Commissioner Mike Kreidler says insurers in Washington are denying claims without a “suitable explanation.” He contends insurance companies are “deliberately” delaying responses when claims are filed, and the applications now used to estimate claims are lowering what they’ll pay for a claim and also without explanation.
The commissioner held a public hearing on the matter last week because — he says — the Office of the Insurance Commissioner’s Consumer Advocacy Program received 467 complaints in April 2023, up from the historic average of 287 a month — a 63% increase.
“Most of the time, the claims process works as intended when insureds and claimants alike are made whole,” Kreidler said. “But when there are disputes, the industry needs to step up and do more to help resolve them in a timely, accurate manner.”
Kenton Brine is the president of the Northwest Insurance Council and is a good friend of the PIA. He sent Weekly Industry News his testimony at Kreidler’s hearing and much of that testimony disputes the commissioner’s conclusions and actually pointed out that insurance companies are “stepping up” and that is an historical truth.
“In fact, companies we have heard from have indicated that the percentage of claims they process each year that result in a complaint to the OIC — and we are talking about thousands, tens of thousands, or even hundreds of thousands of claims annually filed with, and processed by insurers, depending on their size in Washington’s insurance market — is typically less than one percent, year after year,” Brine told the commissioner and those attending the hearing.
He went on to note that in some cases the percentage is even lower than one percent.
“Insurers strive to provide their best service to claimants — often at times when claimants are suffering the worst moments of their lives,” he said “The people who work in claims for insurance companies are caring, dedicated individuals. And as I’ve noted and the data bears out, nearly all of the time, the claims process works as intended.”
Brine also pointed to a J.D. Power and Associates study that shows a claims satisfaction score in 2022 of 871 out of 1,000. Though that’s a pretty good number, insurers are still, very well aware of those sometimes dissatisfied customers.
“Insurers are keenly aware that those numbers mean nothing to an insured claimant whose auto repair is taking longer than they expected, or who has not had a timely response to their email or call from the claims adjuster,” he told the commissioner.
And then he pointed out why the commissioner’s office might be receiving more claims than usual.
- The number of claims is rising dramatically for many insurers, particularly on the auto side. As an example, one company reported a 44 percent increase in filed auto claims between 2020 and 2022.
- Serious, injury-involved crashes are up in Washington. So is auto theft and catalytic converter theft. In just a single day — yesterday — there were three major auto collisions in the Puget Sound region in which six people were killed, 7 or more were injured, some critically, and a car ended up in the Sound off Alki beach in Seattle.
- Costs are rising, and repairs are taking longer to complete. One NWIC-member company reported that between 2020-2022, average labor hours per auto repair increased nearly 4 percent. In the same period, the average number of parts necessary to complete a repair increased more than 13 percent, the cost per part increased 19 percent and the average cost per auto repair overall rose nearly 22 percent.The dramatic jump in auto crashes and claims, coupled with well-documented supply chain and labor market issues are, we believe, at the center of the struggles faced by insurers, auto repair professionals and especially consumers.
- In an effort to provide greater convenience and speed the claim filing process, many insurers have turned to the use of estimating apps that allow the claimant to take and submit photos of auto damage and file their claims online. But as noted in the OIC report, estimating apps are new, and may have limited ability to accurately estimate needed repairs — because the photos submitted by claimants may not reveal the full extent of damage. A photo showing front bumper damage may not reveal frame damage, for example, or damage to sensors or cameras embedded in the vehicle. This is contributing to situations where the final settlement is far higher than the originally submitted estimate. Insurers are still required to pay up to policy limits for repairs to return the vehicle to pre-crash condition, but that disparity between an initial estimate and final repair cost, and the process necessary to complete the repair and settle the claim is in some cases made more complicated than it was two or three years ago.
He also noted that Washington isn’t the only state suffering from this problem.
“The JD Power survey released in 2022 noted that across the country, the average auto repair took 17.8 days to complete — an increase of nearly 3 days over the previous year,” he testified. “In 2019, it was 10 days. Anecdotally, we are hearing from insurers that their claimants are literally waiting weeks or months to get their vehicles into a shop for repair, as shops are at capacity here and in many parts of the country.”
Brine also noted there are many other reasons for claims issues for consumers and he pointed out that the insurance commissioner’s numbers might not be correctly interpreted.
“But it should also be noted that for many or most insurers we have heard from, the percentage of processed claims that result in a complaint to the OIC has not changed over the past two years,” Brine said. “For many companies, the number of claims and the number of complaints have risen at the same rate.”
He also pointed out that many of the issues being experienced by dissatisfied consumers is because of supply chain issues and labor shortages.
“The bottom line is that we are in a challenging time of change. Insurers want to be a part of the positive results that change can bring — like innovation that leads to greater consumer convenience, safer vehicles, more products at reasonable prices for home and auto consumers and satisfaction among consumers with the claims, repair and financial recovery process,” he concluded.
And his bottom-line is that we all should work together to make the claims process the best it can be for the consumer. “We hope that today’s forum not only highlights problems, but also points out where things are going right, and what insurers can do to improve service to their customers,” Brine added.