Shaving millions of dollars off your insurance bills

Little-known fact: In order to raise rates, many insurers in Washington state must get approval from the state insurance commissioner's office.

The companies produce data and calculations showing their justification for the requested rate. The state's actuaries then review the request. The rate that gets approved is often lower than what the companies originally requested.

The upshot: Behind the scenes, the insurance commissioner's office holds your insurance bills lower. Because each request is viewed on a case-by-case basis, some of the rates are approved as requested; others get trimmed down. The companies often argue that they can justify higher rates than they're actually requesting.

In percentage terms, the changes look minor: an average of a fraction of a percent in some years, up to about 3.5 percent. But in a multi-billion dollar business in Washington, those changes can mean millions of dollars a year shaved from Washingtonians' next insurance bills.

Here, for example, is a breakdown of the average difference between requested rates and approved rates for the top 20 homeowners' insurers doing business in Washington:

Year     Change by OIC     Savings to consumers
2001     -.31 percent          $1.8 million
2002     -3.47 perc             $22.1 million
2003     -1 percent             $7 million
2004     -.02 percent          $153,000
2005     -.02 percent          $170,000
2006     $0                         $0
2007     -.03 percent          $280,000
2008     -.54 percent          $5.2 million
2009     -1.72 percent        $16.7 million
                   
                       Total saved: $53 million

Coming soon: A post on how rate review affected WA auto insurance rates. (The short form: Since 2000, $243 million saved.)