Insurers will soon have to provide customers a clear explanation for increases in their auto and home insurance premiums at the time of renewal.

Beginning Saturday, companies must do so in writing if a policyholder requests it. In 2027, that information must be provided automatically and in easy-to-understand language on policy renewal notices.

“If your insurance company is going to increase your premium, you have a right to know why,” Insurance Commissioner Mike Kreidler said in a statement. “Hundreds of consumers, every year, have told us they are unable to get a clear answer from their insurance company about why they’re being charged more..”

Kreidler cited the volume of consumer complaints when he began this effort in February 2022. The lack of clarity can impede policyholders’ ability to decide on whether to renew or change insurers. Disclosing reasons for an increase will promote honesty and fairness in transactions, he has said.

The insurance industry objects to some of the requirements, arguing that the changes will needlessly drive up costs for insurers at a time when many premiums are already on the rise.

The new rule applies to all property and casualty insurers in the state that sell private passenger auto and homeowner coverage, including coverage for manufactured homes, condominiums and renters. Insurers of health, disability, life, and long-term care would be exempt.

The changes will be deployed in two phases.

Starting Saturday, if a premium increase occurs when a policy is renewed, companies must provide a “reasonable explanation” why, in writing, if a customer asks for one by mail or email. Insurers have to use terms “that are understandable to an average policyholder, which enable the policyholder to figure out the basic nature of any premium increase,” according to the rule.

Insurers also must let policyholders know they can ask. This information should appear in 12-point bold font on the first page of renewal notices or billing statements. Companies have 20 days from receiving a written request, by mail or email, to respond, according to the commissioner’s office.

After June 1, 2027, insurance companies face additional requirements. They must send policyholders a notice by mail or email at least 20 days before renewing a policy with a premium increase of 10% or more.

Each notice has to list factors used in calculating the premium and contributing to the hike.

Those can include claims history, discounts, fees and surcharges, as well as the policyholder’s age, credit history, education, gender, marital status, and occupation.

On an auto policy, companies may take into account driving record, miles driven, the number of drivers, the number of vehicles on the policy and where the car is kept.

For homeowner insurance, a property’s age, location, and value are among the variables used in calibrating a premium.

Insurers initially pushed back on Kreidler’s proposal, saying it would result in consumers having to wade through massive formulas and equations used in rate-setting. They still contend what the new rule requires in 2027 goes too far.

This first round of changes kicking in Saturday will give policyholders “the right amount and detail of information” needed to make informed decisions, said Kenton Brine, president of NW Insurance Council, a nonprofit clearinghouse for information on the property and casualty insurance industry.

In the second phase, he said customers will receive “granular detailed premium information whether they request it or not.” He called it “excessive” and said it would add compliance costs for insurers “with little or no added benefit to most consumers.” The council urged the insurance commissioner to reconsider.

“Preparing for this rule change has been costly and time-consuming for insurers at a time when costs are escalating rapidly – costs that are leading to much higher premiums for drivers, renters and homeowners,” Brine said.

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