Individual State Agency Fiscal Note — 1704 HB, Service Contracts, Office of Insurance Commissioner
Summary
This is an individual state agency fiscal note from the Office of Insurance Commissioner for bill number 1704 HB, titled "Service contracts," with OFM review dated 01/16/2022. It estimates operating expenditures of $45,085 in 2021-23 and $24,992 in each of 2023-25 and 2025-27. The note says the bill would let contractual liability insurance policies for service contracts and protection product guarantees fully insure the provider's obligations or cover only a provider default, and would let providers use more than one such policy. It assumes new rulemaking in FY2023, 5 added form filings and 12 added rate filings a year, and two added enforcement cases a year.
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“Individual State Agency Fiscal Note — 1704 HB, Service Contracts, Office of Insurance Commissioner.”
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Individual State Agency Fiscal Note
Bill Number: 1704 HB Title: Service contracts Agency: 160-Office of Insurance
Commissioner
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
NONE
Estimated Operating Expenditures from:
FY 2022 FY 2023 2021-23 2023-25 2025-27
FTE Staff Years 0.0 0.3 0.2 0.1 0.1
Account
Insurance Commissioners Regulatory 0 45,085 45,085 24,992 24,992
Account-State 138-1
Total $ 0 45,085 45,085 24,992 24,992
Estimated Capital Budget Impact:
NONE
The cash receipts and expenditure estimates on this page represent the most likely fiscal impact . Factors impacting the precision of these estimates ,
and alternate ranges (if appropriate ), are explained in Part II.
Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50 ,000 per fiscal year in the current biennium or in subsequent biennia , complete entire fiscal note
form Parts I-V.
X If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia , complete this page only (Part I).
Capital budget impact, complete Part IV.
X Requires new rule making, complete Part V.
Legislative Contact: Michelle Rusk Phone: 360-786-7153 Date: 01/09/2022
Agency Preparation: Michael Walker Phone: 360-725-7036 Date: 01/13/2022
Agency Approval: Mark Dietzler Phone: 360-725-7106 Date: 01/13/2022
OFM Review: Jason Brown Phone: (360) 742-7277 Date: 01/16/2022
Form FN (Rev 1/00) 170,868.00 Request # 22-11-1
FNS063 Individual State Agency Fiscal Note 1 Bill # 1704 HB
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Briefly describe by section number , the significant provisions of the bill , and any related workload or policy assumptions , that have revenue or
expenditure impact on the responding agency .
Section 3 amends RCW 48.110.060 to allow contractual liability insurance policies (CLIPs) for service contracts and
protection product guarantees to either fully insure (first dollar coverage) the obligations of the service contract /protection
product guarantee provider or insure only in the event of service contract /protection product guarantee provider’s default
(default coverage.)
Section 5 amends RCW 48.110.070 to allow service contract providers and protection product guarantee providers to utilize
more than one CLIP to demonstrate financial responsibility requirements under RCW 48.110.050, RCW 48.110.055, and
RCW 48.110.075. All CLIP policy forms must be filed with the Office of Insurance Commissioner per the requirements of
chapter 48.18 RCW.
Section 7 amends RCW 48.110.110 to allow for service contract providers or protection product guarantee providers to be
considered as an agent of each insurer which issued the reimbursement insurance policy or policies.
Section 8 amends chapter 110.140 RCW to allow for consumer protection act protection against each insurer issuing the
applicable service contract or protection product guarantee reimbursement insurance policy or policies.
II. B - Cash receipts Impact
Briefly describe and quantify the cash receipts impact of the legislation on the responding agency , identifying the cash receipts provisions by section number
and when appropriate the detail of the revenue sources . Briefly describe the factual basis of the assumptions and the method by which the cash receipts
impact is derived. Explain how workload assumptions translate into estimates . Distinguish between one time and ongoing functions .
II. C - Expenditures
Briefly describe the agency expenditures necessary to implement this legislation (or savings resulting from this legislation ), identifying by section number the
provisions of the legislation that result in the expenditures (or savings ). Briefly describe the factual basis of the assumptions and the method by which the
expenditure impact is derived . Explain how workload assumptions translate into cost estimates . Distinguish between one time and ongoing functions .
Section 3 amends RCW 48.110.060 to allow contractual liability insurance policies (CLIPs) for service contracts and
protection product guarantees to either fully insure (first dollar coverage) the obligations of the service contract /protection
product guarantee provider or insure only in the event of service contract /protection product guarantee provider’s default
(default coverage.)
Section 3(1) will require the Office of Insurance Commissioner (OIC) to conduct ‘normal’ rulemaking, in FY2023, to define
and clarify “nonperformance of the provider”.
Section 5 amends RCW 48.110.070 to allow service contract providers and protection product guarantee providers to utilize
more than one CLIP to demonstrate financial responsibility requirements under RCW 48.110.050, RCW 48.110.055, and
RCW 48.110.075. All CLIP policy forms must be filed with the OIC per the requirements of chapter 48.18 RCW.
Section 3 and 5 will require the OIC to develop and apply new review standards for property and casualty form and rate
filings. The OIC currently receives approximately 8 form filings and 24 rate filings for CLIP policies insuring service
contract/protection product guarantee providers each year. These moderately complex filings take an average of 4 hours
for form filing review and 3 hours for rate filing review each. Because this bill authorizes companies to utilize more than
one policy issued through more than one company, it is assumed that OIC will receive an additional 5 form filings each year
requiring 20 hours (5 form filings x 4 hours) of a Functional Program Analyst 3 and 12 rate filings each year requiring 36
hours (12 rate filings x 3 hours) of an Actuarial Analyst 3 beginning in FY2023. The OIC will also require one-time costs, in
FY2023, of 8 hours of a Functional Program Analyst 4 (FPA4) to develop new review standards and speed-to-market tool,
update checklist documents and filing instructions, and train staff.
Service contracts 160-Office of Insurance Commissioner
Form FN (Rev 1/00) 170,868.00 Request # 22-11-1
FNS063 Individual State Agency Fiscal Note 2 Bill # 1704 HB
Section 7 amends RCW 48.110.110 to allow for service contract providers or protection product guarantee providers to be
considered as an agent of each insurer which issued the reimbursement insurance policy or policies.
Section 8 amends chapter 110.140 RCW to allow for consumer protection act protection against each insurer issuing the
applicable service contract or protection product guarantee reimbursement insurance policy or policies.
The provisions of sections 7 and 8 will lead to a modest increase in referrals for enforcement. Based on past enforcement
cases regarding service contract providers and protection product guarantees, OIC anticipates two additional enforcement
case per year will be required. Investigations generally require between 25-80 hours per case and enforcement actions
generally require between 25-100 hours per case. For purposes of this fiscal note, it is assumed that investigations will
require an average of 25 hours per case and enforcement actions will require an average of 25 hours per case requiring 50
hours of an Investigator 3 and 50 hours of an Insurance Enforcement Specialist beginning in FY2023.
Ongoing costs:
Salary, benefits and associated costs for .01 FTE Functional Program Analyst 3; .02 FTE Actuarial Analyst 3; .03 FTE
Investigator 3; and .03 FTE Insurance Enforcement Specialist.
Part III: Expenditure Detail
III. A - Operating Budget Expenditures
Account Account Title Type FY 2022 FY 2023 2021-23 2023-25 2025-27
138-1 Insurance State 0 45,085 45,085 24,992 24,992
Commissioners
Regulatory Account
Total $ 0 45,085 45,085 24,992 24,992
III. B - Expenditures by Object Or Purpose
FY 2022 FY 2023 2021-23 2023-25 2025-27
FTE Staff Years 0.3 0.2 0.1 0.1
A-Salaries and Wages 27,150 27,150 14,894 14,894
B-Employee Benefits 8,918 8,918 5,100 5,100
C-Professional Service Contracts
E-Goods and Other Services 9,017 9,017 4,998 4,998
G-Travel
J-Capital Outlays
M-Inter Agency/Fund Transfers
N-Grants, Benefits & Client Services
P-Debt Service
S-Interagency Reimbursements
T-Intra-Agency Reimbursements
9-
Total $ 0 45,085 45,085 24,992 24,992
III. C - Operating FTE Detail: List FTEs by classification and corresponding annual compensation . Totals need to agree with total FTEs in
Part I and Part IIIA
Job Classification Salary FY 2022 FY 2023 2021-23 2023-25 2025-27
Actuarial Analyst 3 93,132 0.0 0.0 0.0 0.0
Functional Program Analyst 3 70,956 0.0 0.0 0.0 0.0
Functional Program Analyst 4 78,408 0.1 0.0
Insurance Enforcement Specialist 87,852 0.0 0.0 0.0 0.0
Investigator 3 74,604 0.0 0.0 0.0 0.0
Senior Policy Analyst 99,996 0.2 0.1
Total FTEs 0.3 0.2 0.1 0.1
Service contracts 160-Office of Insurance Commissioner
Form FN (Rev 1/00) 170,868.00 Request # 22-11-1
FNS063 Individual State Agency Fiscal Note 3 Bill # 1704 HB
III. D - Expenditures By Program (optional)
NONE
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Identify acquisition and construction costs not reflected elsewhere on the fiscal note and describe potential financing methods
NONE
IV. D - Capital FTE Detail: List FTEs by classification and corresponding annual compensation . Totals need to agree with total FTEs in
Part IVB
NONE
Part V: New Rule Making Required
Identify provisions of the measure that require the agency to adopt new administrative rules or repeal/revise existing rules .
Section 3(1) will require the Office of Insurance Commissioner to conduct ‘normal’ rulemaking, in FY2023, to define and
clarify “nonperformance of the provider”.
Service contracts 160-Office of Insurance Commissioner
Form FN (Rev 1/00) 170,868.00 Request # 22-11-1
FNS063 Individual State Agency Fiscal Note 4 Bill # 1704 HB
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