Individual State Agency Fiscal Note, 5108 SB, Service contracts
Summary
Individual State Agency Fiscal Note for 5108 SB, titled Service contracts, from the Office of Insurance Commissioner. The Insurance Commissioners Regulatory Account-State estimate for 2025-27 is 157,178, made up of 103,920 for FY 2026 and 53,258 for FY 2027. The narrative says Section 2(2) requires protection product guarantee providers to meet the same financial responsibility requirements as service contract providers, by insuring each guarantee under a reimbursement insurance policy, maintaining a funded reserve account, or maintaining a net worth or stockholder's equity of at least $100,000,000.
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“Individual State Agency Fiscal Note, 5108 SB, Service contracts.”
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Individual State Agency Fiscal Note
Bill Number: 5108 SB 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 2026 FY 2027 2025-27 2027-29 2029-31
FTE Staff Years 0.4 0.4 0.4 0.4 0.4
Account
Insurance Commissioners Regulatory 103,920 53,258 157,178 106,516 106,516
Account-State 138-1
Total $ 103,920 53,258 157,178 106,516 106,516
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
X
form Parts I-V.
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: John Kim Phone: 360-786-7453 Date: 01/07/2025
Agency Preparation: Tyler Langford Phone: 360-725-7173 Date: 01/10/2025
Agency Approval: Joyce Brake Phone: 360-725-7041 Date: 01/10/2025
OFM Review: Jason Brown Phone: (360) 742-7277 Date: 01/13/2025
Form FN (Rev 1/00) 196,302.00 Request # 25-05-1
FNS063 Individual State Agency Fiscal Note 1 Bill # 5108 SB
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.
Section 2(2) requires protection product guarantee providers to comply with the same financial responsibility requirements
as service contract providers to demonstrate its financial responsibility or assure the faithful performance of its obligations
to its holders. One of the following methods is allowed to be used to demonstrate financial responsibility or assure faithful
performance:
a) Insure each protection product guarantee under a reimbursement insurance policy issued by an insurer holding a
certificate of authority from the Office of Insurance Commissioner (OIC) or an OIC registered risk retention group.
b) Maintain a funded reserve account for its obligations under its protection product guarantees issued and outstanding in
this state; and place in trust with the OIC a financial security deposit.
c) Maintain, or its parent company maintains, a net worth or stockholder’s equity of at least $100,000,000.
Section 4(1) requires reimbursement insurance policies to state that the insurer that issued the reimbursement insurance
policy shall either reimburse the provider or, in the event of nonperformance by the provider or the provider is unable to
fulfill its contractual obligations, the consumer.
Section 4(4) requires reimbursement insurance policies to state that in the event the covered service or product is not
provided by the service contract provider or protection product guarantee provider within 30 days of proof of loss by the
service contract or protection product guarantee holder, the service contract holder or product protection guarantee holder
is entitled to apply directly to the reimbursement insurance company for payment or performance due. If the service
contract provider or protection product guarantee provider has ceased operation, then the holder may apply directly to the
reimbursement insurance company for payment or performance due without waiting the 30 days.
Section 6 permits motor vehicle service contract providers to demonstrate financial responsibility using one of the three
methods currently available to service contract providers under RCW 48.110.050: 1) a reimbursement insurance policy; 2) a
funded reserve account; 3) stockholder’s equity of $100,000,000. Section 6(2)(b)(ii) requires service contracts on motor
vehicles not insured under a reimbursement insurance policy to contain a statement in substantially the following form:
“Obligations of the service contract provider under this contract are backed by the full faith and credit of the service
contract provider.”
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate, the
detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived. Explanation
of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.
II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.
Section 2(2) requires protection product guarantee providers to comply with the same financial responsibility requirements
as service contract providers to demonstrate its financial responsibility or assure the faithful performance of its obligations
to its holders. One of the following methods is allowed to be used to demonstrate financial responsibility or assure faithful
performance:
a) Insure each protection product guarantee under a reimbursement insurance policy issued by an insurer holding a
certificate of authority from the Office of Insurance Commissioner (OIC) or an OIC registered risk retention group.
b) Maintain a funded reserve account for its obligations under its protection product guarantees issued and outstanding in
this state; and place in trust with the OIC a financial security deposit.
c) Maintain, or its parent company maintains, a net worth or stockholder’s equity of at least $100,000,000.
Service contracts 160-Office of Insurance Commissioner
Form FN (Rev 1/00) 196,302.00 Request # 25-05-1
FNS063 Individual State Agency Fiscal Note 2 Bill # 5108 SB
Section 2 will require the OIC to develop and apply new review standards for service contracts on motor vehicles and
protection product guarantee provider registration applications to ensure compliance with the new requirements of financial
responsibility or assuring faithful performance. The OIC currently receives approximately 30 service contracts on motor
vehicles and protection product guarantee provider registration applications each year. These moderately complex
registration applications take an average of 176 hours for application review each. Because of the methods allowed to be
used to demonstrate financial responsibility or assure faithful performance, the OIC assumes that each provider applicant
will require an additional 3 hours of application review requiring 90 hours (30 applicants x 3 hours) per year of a Functional
Program Analyst 3 beginning in FY2026. The OIC will also require one-time costs of 80 hours of a Functional Program
Analyst 3, in FY2026, related to application review to update forms/checklists, update website information, develop new
processes, conduct training, communicate the proposed changes to providers, and accommodate additional applicant
inquiries.
Additionally, the OIC expects approximately one third, or 86, of currently registered service contract providers to update
their registration each year to include an estimated three policies for compliance review, as permitted under Section 2(2)(a).
Each policy takes approximately one hour of compliance review requiring 258 hours (86 service contract providers x 3
policies x 1 hour) per year of a Functional Program Analyst 3 beginning in FY2026.
Section 4(1) requires reimbursement insurance policies to state that the insurer that issued the reimbursement insurance
policy shall either reimburse the provider or, in the event of nonperformance by the provider or the provider is unable to
fulfill its contractual obligations, the consumer.
Section 4(4) requires reimbursement insurance policies to state that in the event the covered service or product is not
provided by the service contract provider or protection product guarantee provider within 30 days of proof of loss by the
service contract or protection product guarantee holder, the service contract holder or product protection guarantee holder
is entitled to apply directly to the reimbursement insurance company for payment or performance due. If the service
contract provider or protection product guarantee provider has ceased operation, then the holder may apply directly to the
reimbursement insurance company for payment or performance due without waiting the 30 days.
Section 4 will require the OIC to develop and apply new review standards for property and casualty form and rate filings. It
will require reviews of multiple default reimbursement insurance policies, in lieu of a single first-dollar reimbursement
insurance policy. The OIC currently receives approximately 15 form filings and 20 rate filings for single first-dollar
reimbursement insurance policies each year and assumes that the number will double because of this bill. These moderately
complex filings take an average of two hours per form filings and four hours per rate filings requiring 30 hours (15 form
filings x 2 hours) of a Functional Program Analyst 3 and 80 hours (20 rate filings x 4 hours) of an Actuary 2 beginning in
FY2026.
Section 6 permits motor vehicle service contract providers to demonstrate financial responsibility using one of the three
methods currently available to service contract providers under RCW 48.110.050: 1) a reimbursement insurance policy; 2) a
funded reserve account; 3) stockholder’s equity of $100,000,000. Section 6(2)(b)(ii) requires service contracts on motor
vehicles not insured under a reimbursement insurance policy to contain a statement in substantially the following form:
“Obligations of the service contract provider under this contract are backed by the full faith and credit of the service
contract provider.” The OIC will be required to review every motor vehicle service contract form filing to ensure the
required language is included in the contract. The OIC currently receives approximately 295 motor vehicle service form
filings each year and assumes that it will take an additional 5 minutes of review per form filing requiring 25 hours (295 x 5
minutes) of a Functional Program Analyst 3 beginning in FY2026.
Sections 4 and 6 will lead to an increase in enforcement actions, including the potential for enforcement in situations in
which a carrier does not comply with the requirements within the bill. The OIC anticipates an average of an additional 2
enforcement cases per year to address compliance issues. For purposes of this fiscal note, it is assumed that enforcement
actions will require the equivalent of approximately 40 hours per case, requiring 80 hours (2 cases x 40 hours) per year of
Service contracts 160-Office of Insurance Commissioner
Form FN (Rev 1/00) 196,302.00 Request # 25-05-1
FNS063 Individual State Agency Fiscal Note 3 Bill # 5108 SB
an Insurance Attorney beginning in FY2026. In addition, OIC anticipates one-time costs in FY2026 of 40 hours of an
Insurance Attorney to provide advice related to this statuary change and its reconciliation with existing statutes and
regulations.
Sections 1 through 6 will require “normal” rulemaking in FY2026 to update and align Chapter 284-110 WAC, Service
Contracts and Protection Product Guarantees with the new statute. This rulemaking will correct statutory
references/citations, reflect the revisions in financial responsibility requirements for providers of vehicle service contracts
and protection product guarantees, provide clarity and guidance on identifying and locating reimbursement insurers, and
outline the proper thresholds for claim processing.
Ongoing Costs:
Salary, benefits, and associated costs for .25 FTE Functional Program Analyst 3; .05 FTE Insurance Attorney; and .05 FTE
Actuary 2.
Part III: Expenditure Detail
III. A - Operating Budget Expenditures
Account Account Title Type FY 2026 FY 2027 2025-27 2027-29 2029-31
138-1 Insurance State 103,920 53,258 157,178 106,516 106,516
Commissioners
Regulatory Account
Total $ 103,920 53,258 157,178 106,516 106,516
III. B - Expenditures by Object Or Purpose
FY 2026 FY 2027 2025-27 2027-29 2029-31
FTE Staff Years 0.4 0.4 0.4 0.4 0.4
A-Salaries and Wages 63,207 32,050 95,257 64,100 64,100
B-Employee Benefits 19,929 10,556 30,485 21,112 21,112
C-Professional Service Contracts
E-Goods and Other Services 20,784 10,652 31,436 21,304 21,304
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 $ 103,920 53,258 157,178 106,516 106,516
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 2026 FY 2027 2025-27 2027-29 2029-31
Actuary 2 142,056 0.1 0.1 0.1 0.1 0.1
Functional Program Analyst 3 78,468 0.3 0.3 0.3 0.3 0.3
Insurance Attorney 106,608 0.1 0.1 0.1 0.1 0.1
Total FTEs 0.4 0.4 0.4 0.4 0.4
III. D - Expenditures By Program (optional)
NONE
Service contracts 160-Office of Insurance Commissioner
Form FN (Rev 1/00) 196,302.00 Request # 25-05-1
FNS063 Individual State Agency Fiscal Note 4 Bill # 5108 SB
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE
IV. D - Capital FTE Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part IVB.
NONE
Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.
Sections 1 through 6 will require “normal” rulemaking in FY2026 to update and align Chapter 284-110 WAC, Service
Contracts and Protection Product Guarantees with the new statute. This rulemaking will correct statutory
references/citations, reflect the revisions in financial responsibility requirements for providers of vehicle service contracts and
protection product guarantees, provide clarity and guidance on identifying and locating reimbursement insurers, and outline the
proper thresholds for claim processing.
Service contracts 160-Office of Insurance Commissioner
Form FN (Rev 1/00) 196,302.00 Request # 25-05-1
FNS063 Individual State Agency Fiscal Note 5 Bill # 5108 SB
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