Study: Washington's Referendum 67 Could Cost Consumers $650 Million

September 24, 2007

Referendum 67, a heavily debated law that would allow consumers to collect triple damages if their insurer unreasonably denies a claim or violates unfair practice rules, is expected to raise insurance rates for Washington businesses and families by as much as an additional $650 million annually, according to a study by national research firm Milliman Inc.

"If a state law is going to take money out of my pocket, I'd like it to pay for real needs, like more teachers for our schools or to fix our transportation problems," said Dana Childers, spokesperson for Consumers Against Higher Insurance Rates. "But all R-67 will buy is more frivolous lawsuits and higher insurance rates. Only trial lawyers benefit from more frivolous lawsuits."

The Milliman study based its estimates of R-67's fiscal impact on the experiences of five states with laws similar to R-67. Researchers found that insurance premiums for Washington residents would go up due to added legal costs imposed by R-67, costing consumers statewide as much as an additional $650 million annually for auto, homeowner and business policies.

The Milliman study joins a corroborating state Office of Financial Management analysis in predicting R-67 will increase Washington insurance rates. The OFM analysis predicts government agencies will likely pay more for auto, property and liability insurance as a result of more lawsuits.

Supporters of R-67 say the law will help consumers to fight against insurance companies with poor practices. On the other hand, opponents, including the insurance industry, say the law will lead to frivolous lawsuits, which will subsequently drive up insurance rates.

Source: Milliman