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Can insurance companies depreciate labor costs in Washington? The Insurance Commissioner stands up for policyholders – Blog about the law on property insurance



Insurance companies will no longer be able to take out insurance policies that reduce labor costs when determining the actual cash value in Washington. The Washington Insurance Commissioner has just made a rule that prevents insurance companies from nickel-plating and degrading their customers by depreciating labor costs. This decision enters into force on 1 January 2022.

On 12 November 2021, which was partially established:

When a homeowner has property damage covered by his home insurance, the insurance company investigates the damage, assesses the damage, and then issues an ACV payment ( Actual Cash Value). The ACV payment is a replacement cost minus depreciation. After the repairs are completely completed, the insurance company releases the withheld depreciation to the insured in order to fulfill its obligation to cover the replacement cost as defined in the insurance. In addition to applying depreciation to impairment due to wear and tear, deterioration and obsolescence on physical property, some insurance companies apply depreciation to labor costs associated with the repair process. For claims for damages, a significant part of the repair costs for the workforce is transferred to the consumer and their repair contractor, which unfairly transfers a burden on the consumer during the repair process and probably against the principle of compensation. The Commissioner has seen a steady increase in policies that incorporate this practice into their definition of actual cash values. The commissioner implemented regulations to prohibit the write-off of work on property claims.

Hopefully, other state insurance commissioners will follow Commissioner Kreidler's leadership. This ruling stops all insurance companies from this practice of reducing coverage and selling on price. It puts insurance companies on an equal footing when it comes to claims costs. It's good general policy for policyholders who need money to pay for repairs and good for insurance companies by doing the competition fair in terms of the products sold.

Thought for the day

Thanks to the abundance of seafood in Puget Sound Washington State is the largest oyster producer in the country.
—Tom Douglas


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