A bill has been re-introduced in the Washington House of Representatives to require insurance providers to include an appraisal clause in contracts with their policyholders.
Washington Rep. Steve Kirby and proponents of HB 1779 hope, if approved, it'll “level the playing field” in disputes between insurers and policyholders within the cash value and amount of loss on damaged vehicles. An amendment towards the bill would require insurance companies to reimburse policyholders for that cost of an appraisal when there is a positive change of $500 or even more between your amount of loss the organization adjusted before the appraisal process and also the quantity of loss determined through the appraisal process.
Rep. Steve Kirby
Folks from each side of the issue testified throughout a Jan. 24 public hearing around the bill prior to the House Consumer Protection & Business Committee.
Kirby said the issue is insurers are steering their policyholders to third-party administrators that they’ve chosen as a solution to prevent them picking shops that are more expensive.
“With time, there's just become this downward pressure around the cost of doing repairs that has fixed it so that their very own third-party administrators really can’t afford to do it and it creates a motivation to chop corners,” he explained. “… many good body shops must have that relationship with insurance providers to enable them to be included in their list of subscribers to send it to. They require the business but at the same time that downward pressure causes it to be very hard for them to really do the job and do it right and do it safely. It’s just, I think, reached a point how to where it’s become a little dangerous.”
Appraiser Mike Harber said he’s completed 137 appraisals in the past year as well as in all of them vehicles were undervalued. The typical underpayment was $4,725 below what insurers offered.
“The insureds paid their deductible,” he explained. “What makes them paying me more income to make their insurer to pay for the claim for the full amount of the loss? HB 1979 will hold the insurer accountable for a fair settlement of a claim.”
The bill is being endorsed by Washington Insurance Commissioner Mike Kreidler. Legislative Liaison Jon Noski spoke on his behalf during the hearing. He explained the balance would give consumers greater protections and provide a standardized right to appraisal.
Attorney Paul Veillon said the bill is comparable to what Oregon already has in position, and delay pills work. “Having an appraisal process will probably be a fast, efficient and inexpensive alternative to litigation over whether the insurer is paying the reasonable cost of necessary repairs,” he explained. “Without this bill there's more litigation than if the bill is in place.”
The bill, Veillon said, also is consistent with state Administrative Code 284-30-380 that holds insurers responsible for the precision of evaluations to determine cash value. He added he doesn’t think shops are likely to charge unreasonable amounts for repairs simply because they have reputations to uphold.
Attorney Steve Hansen said the balance will make the consumer whole for their losses. “What we should find routinely is that the total loss valuations are presented on a take it or let it rest basis,” he said. “There isn't lots of negotiation which goes on and it is once the appraisal process is invoked that there’s any movement that goes on … toward the consumers’ interest.”
Consumer Sandra Lee, who also spoke in support of the balance, talked about twice that they felt duped by her insurance company. The very first happened in 2022 and because the result of a class action lawsuit, she received a check recently, though she still doesn’t think she received what she’s owed. The 2nd time she was offered $4,000 less than her vehicle’s worth.
“To believe that they were not being honest beside me was very disheartening,” she said. “It’s unfair because what a lot of people don’t realize may be the loss to the consumer unless you actually experience this.”
Lee mentioned insurers only spending money on accommodations for Thirty days and lost time from work trying to find a replacement vehicle as costs towards the consumer.
“I believe that it’s only fair our insurance companies take on all of the price of the appraisal when the actual price of the vehicle isn't appraised appropriately because when a consumer you should be able to trust that our insurer can do what’s best by us,” she said. “On two occasions, which has not been done in my case.”
Associations representing insurers spoke to oppose the balance calling it an “unfair process for evaluating disputed claims” and said having to pay for appraisals and associated costs will drive premium costs up.
“Insurers take seriously their duties to return a damaged vehicle to pre-crash status,” said Mel Sorensen using the American Property Casualty Insurance Association. “They would like to do this with focus on safety, quality and cost effectiveness. … Insurers don't have any interest in a shoddy repair using poor quality parts.”
The bill, he added, sets up a no-risk incentive for auto repair facilities to potentially inflate repair estimates, that could impose delays on claimants and accumulate storage costs. He asked that the bill start adding some sort of consequence for repair shops that take an “unreasonable position relative to costs.”
Northwest Insurance Council President Kenton Brine said he agreed with all of Sorensen’s comments and said consumers don’t want change by noting J.D. Power’s October 2022 consumer satisfaction study that showed overall satisfaction using the auto insurance claims process was at an archive high of 880 on the 1,000-point scale and is the fourth consecutive year of improvement.
Jean Leonard, with Washington Insurers Group, said the way the “one-sided” bill is written now, insurers could be “forced into an unlevel appraisal situation any time somebody disputed a cost estimate anytime in the process and that would cause really awful delays.”
Washington Independent Collision Repairer's Association President Jeff Butler told Repairer Driven News he believes the bill, that they helped write, is a resolution to the point.
“Insurance companies have defense funds in their budget – they've huge amount of money, billions of dollars, to battle and defend these kinds of things,” he said. “Who’s taking the risk to visit fight their insurance provider when they’re going to need to pay the fees from the insurance provider? It’s far too big of a burden for that consumer.”
The bill incentivizes insurance companies to pay for fairly because if they don’t, they’re confronted with some reprisal, Butler added.
“They’re threatened through the change in market conduct,” he said. “They’re threatened by the alternation in rights.”
Another hearing on the bill is scheduled for today at 10 a.m. before the committee.