Why home and auto insurance rates are up in Washington

By Bill Lucia

Washington State Standard

Insurers say rising costs for vehicle repairs and home rebuilding are behind escalating premiums. For state lawmakers grappling with the issue, there are few easy fixes.

Washington residents have seen home and auto insurance rates climb steeply over the past couple of years.

On Monday, December 9, 2024 insurance industry representatives offered state lawmakers their breakdown of what’s behind those trends. They also explained how heightened risks from wildfires and other climate-related disasters are causing insurers to rethink underwriting in some regions.

In short, the industry blames higher costs for auto repairs and home rebuilding as a main culprit driving up premiums. Inflation is a factor. But on the auto side, vehicles are also pricier to fix as safety equipment and other technology become more sophisticated.

“Insurers are facing large-scale losses on a national level, and they’re reassessing how much risk they can tolerate in order to remain stable, financially healthy, profitable, and that’s affecting availability,” said Kenton Brine, president of the NW Insurance Council.

“The affordability issue is really strictly limited to issues around the dramatically rising cost of paying to repair and replace homes and cars,” Brine added during a House Consumer Protection & Business Committee work session.

Insurers, lawmakers and regulators in the meeting did not flag any alternatives that would quickly pull prices back down.

When it comes to the availability of homeowner’s insurance, consumers are worse off in other states. A metric that underscores this is how many people have turned to insurer-of-last-resort programs, an option when someone has difficulty obtaining a policy in the standard market.

In Florida, there are now more than 1.3 million of these last resort policies in effect, and in California upward of 410,000, according to figures from the Washington state Office of the Insurance Commissioner. The office’s data show only 289 of the policies in Washington.

But consumers in Washington are feeling the pressure from rising insurance prices. Other figures that staff from the commissioner’s office shared Monday highlighted how sharply rates have climbed.

Homeowner rates among the top 20 companies in Washington were up 21.7% year-over-year as of Dec. 1. And auto rates were up 17.5%. These hikes followed steep increases in 2023.

Meanwhile, the office says auto claim costs climbed from the $3 billion to $3.5 billion range between 2018 to 2020 to around $5.4 billion last year. Similarly, homeowner claim costs rose from around $941 million in 2018 to nearly $2 billion in 2023.

“All of a sudden, it kind of exploded,” David Forte, senior property and casualty policy advisor in the insurance commissioner’s office, told lawmakers as he walked through the rising cost figures for homeowner insurance claims.

Brine said “partnerships and incentives” could help attract insurers into new markets. Adopting regulations that make homes more resistant to burning down in wildfires and taking steps to improve road safety might also help to eventually bring down rates, he added.

Katie Kolan, speaking for Washington insurers, including PEMCO, highlighted other states, such as California, Florida, and Louisiana, where affordable policies have been increasingly hard to come by. “By comparison, Washington state is actually in a pretty good position,” she said.

She urged lawmakers to avoid legislation that increases expenses for the industry by mandating certain coverage, adding underwriting restrictions, or imposing new administrative requirements.

In June, a new rule took effect in Washington that gives policyholders the ability to ask their insurers to explain rate increases. A second phase of the rule, set to take effect in 2027, would require companies to send these explanations automatically when rate increases are above a certain level.

The industry has asked for a delay in the timeline for pressing ahead with the second phase of the rule, citing implementation costs.