Changes to Insurance Regulations May Delay Closings
At Cross Insurance Agency we believe in “Insurance with no surprises.” With that in mind, we felt it was essential to reach out to our partners and friends in the Mortgage and Real Estate industry with an update on some recent changes in the insurance marketplace in Washington state that may impact you and your clients in securing home and auto coverage for a brief period. This change will also have a larger impact when existing policies start to renew later this year.
On March 23, 2021, Washington State Insurance Commissioner, Mike Kreidler, issued an Emergency Rule Order that temporarily prohibits insurers from using credit-based insurance scoring to help determine premiums and eligibility for coverage in private automobile and homeowner’s insurance products. The prohibitions in this rule will apply to all new policies with an effective date of June 20, 2021 or later and all existing policies processed for renewal on or after this date. This order applies to all home and auto insurance carriers and policyholders in Washington state.
Many insurance carriers in Washington base their rates on a multitude of factors. The number of discounts or surcharges provided to the consumer, by the carrier, can vary significantly based on various these factors, one of which is an “insurance score.” Insurance scores take into consideration things such as past payment history, amount of debt carried, home and auto loans, and lastly, credit scores. The insurance score is then used to help assess the potential of a loss. Generally, the better your credit, the lower the price you pay for protection.
Due to Commissioner Kreidler’s order, many carriers are scrambling to get their updated, credit-neutral rates approved. Once their rates are approved, they will also need time to update their internal systems with these new rates.
What this means to you and your clients
Most carriers are honoring the currently quoted rates for policies with an effective date of June 19, 2021, and earlier. Any policy with an effective date of June 20, 2021, or later will be required to comply with the new credit-neutral order. As it can take some time to update systems, many insurance carriers are notifying the agent they work with that there may be a temporary moratorium on any new home or auto business with an effective date of June 20 and later. This may make it difficult for your customer to obtain an insurance quote in a timely fashion and could cause a problem when it comes to figuring out the client’s debt to income ratio or even just getting proof of coverage to secure funding on a new purchase.
As policies start to renew later this year, there could be an increase (or decrease) in premium with these new credit-neutral rates. The good news is that the rates will not change on an existing policy until its renewal date. However, we want you to be aware of the possibility of an increase so that if you receive a call from your customer about their payment going up (due to insurance costs), you will be able to provide them with this information.
- If you can close before June 19, 2021, do it! This will ensure that there will be no change to the insurance rates.
- If you cannot close before June 19, 2021,be patient! It may take a little time for the markets to open back up fully. At Cross Insurance Agency, we work with the best carriers in the state and watch daily for updates from these and other carriers. (We are already able to provide quotes with one of our largest carriers as they filed their rates early and implemented the system changes quickly).
- For customers who are refinancing – Ride the wave. The best thing to do is wait, be patient, do not get hasty in “shopping.” Since these changes to the marketplace do not affect the current policy, we recommend you wait as the disruption in the market settles. There will be multiple “waves” to these rate changes, and it may be best to wait it out a while. However, if there is a need to change carriers, our agency would love to have a conversation with you or your customer.
- Take advantage of discounts. Many insurance carriers offer a wide range of discounts, especially when bundling your policies. Before evaluating any changes to your policy, be sure to consider the discounts available.
- Please do not exchange a cheaper rate for inadequate coverage, whether that is your home, car, boat, or cost of potential legal action. Saving money on your monthly payments in exchange for lower protection will leave you vulnerable when you need it the most. Carefully consider any new policy and how it will protect you.
Our Promise to our customers
- We are monitoring this closely and are in constant communication with our insurance partners.
- This rule will not affect your current active policy. Any changes to your rate will only be known at your renewal.
- As your professional insurance advisors, we are monitoring all our customers’ accounts. We will be proactively contacting anyone who will see their rates negatively impacted due to this emergency credit ruling.
- We will proactively reach out to you prior to your renewal to discuss any changes you may have to your insurance needs.
What happens next?
As mentioned above, we are closely watching and prepared for any changes coming on June 20. In addition, our professional and fully licensed agents are here to make sure your insurance is easy to understand while being helpful, informative, and friendly.
Please feel free to share this information with anyone you think would benefit from it, and do not hesitate to reach out with any questions you might have.
If you would like to keep up-to-date on any changes that happen as this situation unfolds, we have a dedicated page that will be continually updated with the latest information. You can follow that page here.
Stephen Harrington, CIC
Chief Operations Officer
Cross Insurance Agency, Inc.