Washington Senate Committee Advances Bill for Direct Restitution to Policyholders
The Washington Senate Business, Financial Services and Trade Committee has recently approved a significant bill that empowers the insurance commissioner to mandate property and casualty insurers to pay restitution directly to policyholders in cases of code violations. This development has been reported by AM Best.
This legislation is a top priority for the newly appointed Washington Insurance Commissioner, Patty Kuderer (as shown above), who emphasizes that the bill will provide a crucial avenue for policyholders to recover losses incurred due to violations by their insurance carriers. Currently, fines imposed on insurers are deposited into a general fund, which does not benefit the affected policyholders.
Kuderer articulated the importance of the bill, stating, “What I hear from the insurance industry is that the good companies already do that; they already pay restitution voluntarily. However, the bad actors do not, and we currently lack a mechanism to compel them to do so.”
In contrast, industry trade groups have expressed skepticism regarding the necessity of granting the commissioner restitution authority. In a formal letter addressed to the House committee, they contended that property and casualty companies are already obligated to reimburse policyholders, in addition to paying any imposed fines.
The commissioner’s office clarified that existing laws do not explicitly require restitution. For instance, if a producer commits fraud against a consumer, the commissioner can revoke the producer’s license and impose a fine but lacks the authority to ensure that the consumer receives repayment. Kuderer noted, “The bill would allow for these consumers to be made whole, without having to hire an attorney and pursue legal action.” Her office also highlighted that restitution orders would specifically target bad actors, excluding companies that reach settlements with consumers.
If enacted, this bill would further enable the commissioner to impose fines on property and casualty insurers on a per-violation basis. Currently, the commissioner can issue a total fine of up to $10,000 against a company for violations. This provision has faced opposition from industry groups, who argue that the commissioner’s office already possesses the authority to negotiate penalties that exceed the $10,000 threshold.
In response to these concerns, Kuderer reassured stakeholders, stating, “If the current limit is $10,000, but the Office of the Insurance Commissioner (OIC) can issue a consent order that includes a $40,000 fine plus restitution, it is concerning to consider the penalty in a consent order when the OIC is authorized to issue up to $10,000 per violation.”
However, Kuderer dismissed these worries as unfounded, noting that similar regulations are already in place for other types of insurance. “We already have a per violation fine schedule for all other lines of insurance, and we have not observed any adverse effects. I see no reason why this would be any different for property and casualty insurance,” she added, highlighting that approximately 40 other states have adopted similar policies.
Source: Insurance Business Mag
