Report - 2025 02 19 A32828 D280824 Bill Report 5331 Sbr Bft Ta 25

Summary

A Senate Bill Report on SB 5331, as of January 30, 2025, prepared by staff of the Senate Committee on Business, Financial Services & Trade, on a bill strengthening consumer protection through increased insurer accountability for violations of the insurance code. The bill is sponsored by Senator Cortes and others at the request of the Insurance Commissioner. The report states that the bill would authorize the Office of the Insurance Commissioner to order restitution, paid with 8 percent simple interest within 30 days of the order, and to fine authorized insurers up to $10,000 per violation rather than $10,000 total. Background notes that current fines may not be less than $250. The report summarizes supporting testimony and other testimony from insurance industry representatives raising concerns about per-violation fines.

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                            SENATE BILL REPORT
                                  SB 5331

                                      As of January 30, 2025

Title: An act relating to strengthening consumer protection through increased insurer
     accountability for violations of the insurance code.

Brief Description: Strengthening consumer protection through increased insurer accountability
     for violations of the insurance code.

Sponsors: Senators Cortes, Frame, Hasegawa, Kauffman, Lovelett, Lovick, Nobles, Orwall,
    Stanford, Trudeau and Wilson, C.; by request of Insurance Commissioner.

Brief History:
     Committee Activity: Business, Financial Services & Trade: 1/30/25.


                                     Brief Summary of Bill
           • Authorizes the Office of the Insurance Commissioner to order the
             payment of restitution in enforcement actions.
           • Authorizes the Office of the Insurance Commissioner to levy fines
             against authorized insurers of up to $10,000 per violation, rather than
             $10,000 total.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: John Kim (786-7453)

     Background: The Office of the Insurance Commissioner (OIC) administers the
     Washington Insurance Code (code) and oversees insurance companies and insurance
     professionals conducting business in the state. As part of its enforcement authority, the OIC
     may prosecute an action in any court of competent jurisdiction to enforce an order by the
     commissioner pursuant to any provision of the code. If the OIC has cause to believe that
     any person is violating or is about to violate any provision of the code or any regulation or




     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                             SB 5331
     order of the commissioner, the OIC may issue a cease and desist order or bring an action to
     enjoin the person from continuing the violation or doing any action in furtherance thereof.

     An authorized insurer is an insurer transacting insurance in the state through a certificate of
     authority issued by the OIC. In imposing disciplinary actions against an authorized insurer,
     the OIC is authorized to levy a fine in addition to or in lieu of suspending, revoking, or
     refusing to review the insurer's certificate of authority. The amount of the fine may not be
     less than $250 and may not be more than $10,000.

     Summary of Bill: Authority to Order Restitution. In addition to its authority to issue cease
     and desist orders and bring actions for injunctive relief, the OIC may also order the payment
     of restitution when a person regulated under the code possesses or controls, directly or
     indirectly, such fees, money, funds, or other property that belongs to, is due to, or is owed to
     another person.

     After hearing or with the consent of the person, the OIC may order such person to pay
     restitution to any person entitled to restitution in the form of fees, money, funds, or other
     property.

     Restitution must be paid with 8 percent simple interest from the date the obligation arose. It
     must be paid to the person to whom it is due within 30 days of the date of the order.

     Authorized Insurer Fines. The OIC may levy fines against authorized insurers of up to
     $10,000 per violation, rather than $10,000 total.

     Appropriation: None.

     Fiscal Note: Available.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.

     Staff Summary of Public Testimony: PRO: It is critical that we have pathways for
     consumers to receive restitution if they have been harmed by an insurer rather than going
     through the court system. This bill strengthens consumer protections by giving the state
     Office of the Insurance Commissioner additional enforcement tools if an insurance
     company is violating the law. This bill is designed to address bad actors only. Most insurers
     and producers do the right thing by their policyholders and cooperate with the OIC when a
     mistake is made, but not every one of them does. When OIC imposes a fine, it incentivizes
     the insurer or individual to come back into compliance and helps deter them from harming
     future consumers. But the fine goes to the General Fund and not to the policyholders, and
     that is why we need the authority to institute restitution. The fine schedule for property and
     casualty insurers has not been updated since 1980. Every other insurer in our state and


Senate Bill Report                              -2-                                          SB 5331
     producer is held to a per-violation standard except for property and casualty insurers. It's
     time to put them on parity with the rest of the insurers in the state. We have worked with the
     industry on an amendment to address all concerns but one, that is a cap imposed on
     fines. The Independent Insurance Agents and Brokers of Washington supports the bill to go
     after bad actors, such as an agent who takes a premium but fails to remit it to the insurer or
     an agent who fails to remit a refund from an insurer to the customer.

     OTHER: We appreciate the target of the bill is toward bad actors, but the good actors are
     covered by this bill, and so we want to make sure that the definitions are tight as referenced
     around restitution and who this applies to. Under the current consent order process, property
     and casualty insurers routinely pay fines well in excess of $10,000 and pay restitution in the
     form of refunding premiums or taking other actions to reimburse policyholders who can
     show they have been harmed. The problem comes in when an insurer challenges the OIC
     before an administrative law judge (ALJ). This bill goes beyond that because it doesn't just
     address fines in the ALJ process. A per-violation standard for fines is a hammer. It provides
     opportunity for the insurance regulator to apply more pressure on insurers in the consent
     order process as well as issue fines it can't issue in the ALJ process. We are working with
     the OIC in tightening the language. Of the 35 or so states that have per-violation standards,
     it's very common to have one or more of aggregate caps, distinctions, or tiered impositions
     based on intent, willfulness, or inadvertence. The overarching concern with the penalties
     provision is the risk of unfair treatment of good actors.

     Persons Testifying: PRO: Senator Adrian Cortes, Prime Sponsor; Patty Kuderer, Office of
     the Insurance Commissioner; Bryon Welch, Office of the Insurance Commissioner; Rory
     Paine-Donovan, Office of the Insurance Commissioner; Bill Stauffacher, Independent
     Insurers and Brokers of Washington.

     OTHER: Christine Brewer, Premera Blue Cross; Kenton Brine, NW Insurance Council;
     Kris Tefft, American Property Casualty Insurance Association.

     Persons Signed In To Testify But Not Testifying: No one.




Senate Bill Report                             -3-                                         SB 5331


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