Every once in a while, an insurance regulator gets it right by focusing not on slogans, but on how claims actually unfold in the real world. Washington State’s Office of the Insurance Commissioner has done exactly that in its Third Prepublication Draft of proposed claims handling regulations. The result is one of the most meaningful modern updates to unfair claims settlement practices I have seen in years. Other insurance regulators would be wise to study this proposal carefully and consider following its lead.
Before diving in, I want to give credit where it is due. Sarah Parker brought these proposed regulations to my attention. I am grateful she did. Thoughtful professionals who read regulatory drafts and recognize their broader significance do the entire policyholder community a service.
The single most important change in Washington’s proposal is deceptively simple but profoundly important. The regulations consistently shift claims handling timeframes to begin at notice of loss rather than proof of loss. That change alone would dramatically improve fairness in claims handling if adopted elsewhere.
Anyone who has handled property insurance claims knows the truth: proofs of loss are often not submitted for months after a loss, and sometimes not at all, depending on policy language. Many policies require a proof of loss only when the insurer demands one. In practice, insurers can and do delay that demand, effectively controlling when regulatory clocks begin to run. Many insurance regulations are far behind the times by tying deadlines to the proof of loss. This has allowed investigations to drift, decisions to stall, and payments to be postponed without regulatory accountability.
Starting the clock at notice of loss restores balance and aligns with what is taught by the insurance claims industry itself. Once an insurer learns of a claim, it should be required to act. That is how consumers reasonably expect insurance to work. Washington’s proposal aligns regulation with that common-sense expectation. It matters because it prevents delay by design and eliminates a loophole that has been exploited far too often.
The proposal also strengthens investigation standards in a way that reflects how claims are actually handled today. Insurers are still given thirty days to complete an investigation after notice of loss, but if they cannot, they must now provide written explanations every thirty days explaining why. Importantly, those explanations must be substantive. They must describe what decisions have been made, what information is still outstanding, whether experts have been retained, and even whether a new adjuster has taken over the file and reviewed it.
This matters because vague status letters have become a staple of delay. Saying “the investigation is ongoing” tells a policyholder nothing. Washington’s approach forces transparency and creates a paper trail that regulators, courts, and policyholders can later examine. Claims handling becomes a process that can be evaluated, not a black box.
Equally important is the draft’s clear rejection of database-only adjusting. The regulations explicitly state that a reasonable investigation cannot rely solely on estimating software or benchmark databases. That language is long overdue. Software can be a tool, but it cannot substitute for judgment, inspection, and individualized assessment. Claims are about facts, not defaults.
This matters because policyholders routinely face underpayments justified by nothing more than “the software says so.” By requiring insurers to do more than push a button, the regulation reinforces that claims handling is a professional obligation, not an automated exercise.
The proposed rules also address mitigation in a practical and fair way. When a policy requires a policyholder to protect property from further damage, the insurer must now approve or reject a mitigation scope within five business days. If the insurer rejects it, the rejection must explain why, including technical or industry-standard reasons and dollar-specific explanations.
That matters because delayed mitigation decisions often become the basis for later denials. Policyholders are told to act quickly to prevent further damage, only to be second-guessed after the fact. Washington’s approach forces insurers to engage early and honestly, which protects both parties and reduces post-loss disputes.
Another critical improvement is the treatment of undisputed amounts. The proposal requires insurers to timely pay the undisputed portion of a claim even if other portions remain in dispute, and it makes clear that doing so does not waive the insurer’s right to contest the remainder. Most insurers pay undisputed partial payments as a matter of good faith conduct, but not all. Indeed, some argue that based on policy language, no payment is due until the entire loss is agreed to, a judgment is rendered, or an appraisal award is reached.
This matters because undisputed funds are too often used as leverage. Policyholders are pressured to accept less than they are owed because the money they undeniably need is being withheld. Paying what is not in dispute is not generosity; it is basic fairness and good faith.
Transparency is further enhanced by expanded access to claim files. The proposed regulations require insurers to provide claim file materials within fifteen business days of a request, including adjuster notes, reports, estimates, and photographs. If something is withheld, the insurer must explain why and identify what is being withheld.
This matters because information asymmetry is one of the greatest sources of abuse in claims handling. When insurers control the evidence and the narrative, policyholders are forced to argue in the dark. Transparency restores trust and accountability.
The proposal also directly addresses an issue public adjusters and policyholder attorneys have raised for years: discrimination against represented claimants. The draft explicitly prohibits unfair treatment of claimants because they are represented by a public adjuster, including failure to recognize the representative or failure to share information timely.
That matters because representation should not be treated as hostility. Policyholders have the right to professional help. Insurance regulators should not tolerate practices that punish consumers for exercising that right.
Taken as a whole, Washington’s proposed regulations do not create radical new obligations. They require insurers to do what they already say they do to investigate promptly, communicate honestly, explain decisions, and pay what is owed without gamesmanship. What makes this proposal significant is that it closes loopholes, reflects modern claims realities, and centers accountability at the moment it should begin, when the loss is first reported.
Other state insurance regulators should take note. Starting claims handling timeframes at notice of loss rather than proof of loss is not only sensible, it is necessary. If insurance is meant to be a promise of protection rather than a test of endurance, rules must reflect how claims actually unfold, not how delay is engineered.
Thought For The Day
“Justice will not be served until those who are unaffected are as outraged as those who are.”
— Benjamin Franklin
