SB 1137: Insurance; Rate Changes; Notice

A BILL FOR AN ACT

RELATING TO INSURANCE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that insurers operating in the State are mandated to submit rate change proposals to the Hawaii insurance division for approval before implementation, ensuring compliance with insurance laws and protecting policyholders from rates that are excessive, inadequate, or unfairly discriminatory.  However, there is a lack of explicit requirements for insurers to provide direct notice to individual policyholders regarding rate changes, which can leave consumers uninformed about adjustments that may affect their coverage and financial planning.

     To enhance consumer protection and transparency, the legislature finds that it is essential to mandate that insurers provide direct written notice to policyholders about rate increases or significant policy changes, in addition to notifying the insurance commissioner.  This direct communication ensures that policyholders are adequately informed and can make timely decisions regarding their insurance needs.  The legislature also finds that several states have implemented regulations requiring insurers to notify policyholders directly of rate changes, like New Jersey, which requires insurers proposing an average rate increase to send notices directly to policyholders, and Washington, where insurers must provide notice of premium changes at least twenty days before renewing a policy with a ten per cent or greater increase.  Implementing a similar requirement in Hawaii would align with these best practices, fostering transparency and accountability in the insurance industry.  By ensuring that policyholders receive direct and timely notifications of rate changes, consumers are empowered to make informed decisions, seek alternative coverage if necessary, and better manage their financial planning.  Therefore, the legislature emphasizes the importance of direct communication between insurers and policyholders, advocating for mandatory direct written notices of rate changes to enhance consumer protection and promote fairness in the insurance market.

     The purpose of this Act is to require insurers to notify policyholders of rate changes at least thirty days before the effective date of the rate change.

     SECTION 2.  Chapter 431, Hawaii Revised Statutes, is amended by adding a new section to article 14, subpart I, to be appropriately designated and to read as follows:

     "§431:14-    Rate changes; notification to policyholders.  (a)  Beginning January 1, 2026, insurers shall notify affected policyholders in writing of any rate changes approved by the commissioner under section 431:14-104.

     (b)  The notification shall include:

     (1)  A clear statement of the new rate and its effective date;

     (2)  The percentage increase or decrease in the rate compared to the prior period;

     (3)  A brief explanation of the reasons for the rate change, including relevant factors such as claims experience, inflation, or other actuarial considerations; and

     (4)  Information on how policyholders can contact the insurer or the Hawaii insurance division regarding questions or concerns about the rate change.

     (c)  The notification shall be sent at least thirty days before the effective date of the rate change.

     (d)  Notification may be sent via mail to the last known address of the policyholder or electronically if the policyholder has consented to electronic communications.

     (e)  Failure to comply with this subsection shall result in administrative penalties as prescribed under section 431:2-203, including fines or corrective actions as determined by the commissioner."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2050.

Report Title:

Insurance; Rate Changes; Notice

Description:

Beginning 1/1/2026, requires insurers to notify policyholders of rate changes at least 30 days before the effective date of the rate change.  Effective 7/1/2050.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO INSURANCE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that insurers operating in Hawaii are mandated to submit rate change proposals to the Hawaii insurance division for approval before implementation, ensuring compliance with insurance laws and protecting policyholders from rates that are excessive, inadequate, or unfairly discriminatory.  However, there is a lack of explicit requirements for insurers to provide direct notice to individual policyholders regarding rate changes, which can leave consumers uninformed about adjustments that may affect their coverage and financial planning.

     To enhance consumer protection and transparency, the legislature finds that it is essential to mandate that insurers provide direct written notice to policyholders about rate increases or significant policy changes, in addition to notifying the insurance commissioner.  This direct communication ensures that policyholders are adequately informed and can make timely decisions regarding their insurance needs.  The legislature also finds that several states have implemented regulations requiring insurers to notify policyholders directly of rate changes like New Jersey which requires insurers proposing an average rate increase to send notices directly to policyholders and Washington where insurers must provide notice of premium changes at least twenty days before renewing a policy with a ten per cent or greater increase.  Implementing a similar requirement in Hawaii would align with these best practices, fostering transparency and accountability in the insurance industry.  By ensuring that policyholders receive direct and timely notifications of rate changes, consumers are empowered to make informed decisions, seek alternative coverage if necessary, and better manage their financial planning.  Therefore, the legislature emphasizes the importance of direct communication between insurers and policyholders, advocating for mandatory direct written notices of rate changes to enhance consumer protection and promote fairness in the insurance market.

     The purpose of this Act is to require insurers to notify policyholders of rate changes within thirty days after approval by the insurance commissioner of a rate change and not less than thirty days before the effective date of the rate change.

     SECTION 2.  Chapter 431, Hawaii Revised Statutes, is amended by adding a new section to article 14, subpart I, to be appropriately designated and to read as follows:

     "§431:14-     Rate changes; notification to policyholders.  (a)  Insurers shall notify affected policyholders in writing of any rate changes approved by the commissioner under section 431:14-104.

     (b)  The notification shall include:

     (1)  A clear statement of the new rate and its effective date;

     (2)  The percentage increase or decrease in the rate compared to the prior period;

     (3)  A brief explanation of the reasons for the rate change, including relevant factors such as claims experience, inflation, or other actuarial considerations; and

     (4)  Information on how policyholders can contact the insurer or the Hawaii insurance division regarding questions or concerns about the rate change.

     (c)  The notification shall be sent no later than thirty days after the rate filing is approved by the commissioner and at least thirty days before the effective date of the rate change.

     (d)  Notification may be sent via mail to the last known address of the policyholder or electronically if the policyholder has consented to electronic communications.

     (e)  Failure to comply with this subsection shall result in administrative penalties as prescribed under section 431:2-203, including fines or corrective actions as determined by the commissioner."

     SECTION 3.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on January 1, 2026.

Report Title:

Insurance; Rate Changes

Description:

Requires insurers to notify policyholders of rate changes within 30 days of approval by the Insurance Commissioner and not less than 30 days before the effective date of the rate change.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 720

Honolulu, Hawaii

RE:    S.B. No. 1137

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which was referred S.B. No. 1137 entitled:

"A BILL FOR AN ACT RELATING TO INSURANCE,"

begs leave to report as follows:

     The purpose and intent of this measure is to require insurers to notify policyholders of rate changes within thirty days of approval by the Insurance Commissioner of a rate change and not less than thirty days before the effective date of the rate change.

     Your Committee received testimony in support of this measure from four individuals.

     Your Committee received testimony in opposition to this measure from the National Association of Mutual Insurance Companies.

     Your Committee received comments on this measure from the Department of Commerce and Consumer Affairs.

     Your Committee finds that there is a lack of consistency among insurers providing direct notice to individual policyholders regarding rate changes, leaving many consumers uninformed about adjustments to their insurance coverage that could affect their financial future.  Your Committee finds that several states, such as New Jersey and Washington, have implemented regulations requiring insurers to directly notify policyholders of any rate changes within specified time frames of the changes becoming effective.  This measure establishes a baseline standard for required information to be disclosed to increase transparency and enhance consumer protection.

     Your Committee acknowledges the testimony of the Department of Commerce and Consumer Affairs expressing concerns that this measure may create significant operational challenges for insurers without providing meaningful benefits to policyholders.  Insurers typically need time to operationalize the changes once a rate filing is approved by the Insurance Commissioner, which includes updating internal rating systems, testing for accuracy, and ensuring compliance with regulatory requirements.  Your Committee also acknowledges the concern that issuing notices before insurers have fully validated rate changes could result in inaccurate or unclear information being communicated to policyholders.  Amendments to this measure are therefore necessary to address these concerns.

     Accordingly, your Committee has amended this measure by:

     (1)  Deleting language that would have required the notification to be sent no later than thirty days after the rate filing is approved by the Insurance Commissioner and clarifying that the notification shall be sent at least thirty days before the effective date of the rate change;

     (2)  Updating section 1 to reflect its amended purpose;

     (3)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (4)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Commerce and Consumer Protection that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1137, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1137, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Commerce and Consumer Protection,