A special R.I. House of Representatives commission that is studying the effects of natural disasters on property insurance costs in the state last week introduced legislation to protect homeowners from paying unreasonable rates to insure their homes for hurricane damage or from having their policies canceled altogether.
Two bills came out of the work of the commission, which began meeting last summer as an ad hoc group of legislators interested in addressing a post-Katrina insurance crisis affecting homes near – and sometimes not-so-near – the coast.
The first bill, sponsored by Rep. Paul W. Crowley, D-Newport, the commission’s chairman, would ban any insurance company doing business in Rhode Island from canceling or refusing to issue insurance to any owner-occupied home “primarily” because of its location. Current law bans such cancellation based “solely” on location, but the change of that single word would expand protection to more homes in the state.
The second bill, sponsored by Rep. Brian Patrick Kennedy, D-Hopkinton, would institute several limits on what insurers can demand from policyholders when it comes to protecting against hurricane damage.
The bill would require that all insurers requiring mandatory hurricane deductibles offer customers a choice between flat-dollar and percentage-basis deduct-ibles, and provide a notice to the policyholder that fully explains both options. The bill also stipulates that insurers should consider waiving the deductible for policyholders who take steps to prevent hurricane losses, such as installing storm shutters or roof tie-downs.
The bill also stipulates that the deductible shall go into effect from the moment a National Weather Service hurricane watch or warning is issued for any part of the state in which the insured property is located. That provision is meant to provide a uniform definition of when a hurricane begins and ends for the purposes of insurance.
Finally, the bill requires that the amounts of all deductibles, waivers and credits must be supported with actuarial evidence.
Throughout hearings this year, the commission has argued that insurers have offered little scientific evidence to back up their claims that Rhode Island homes are facing any kind of increased risk for hurricane damage.
“The insurance industry relies very heavily on modeling numbers and research, because insurers have to be able to absorb substantial risk,” said Kennedy, who is chairman of the House Corporations Committee and serves as vice president of the National Conference of Insurance Legislators. “If insurers are going to charge homeowners excessive premiums for some perceived risk, then they should supply solid research and actuarial studies to back up their assertions. We are taking proactive steps to give Rhode Island home owners new protections to ensure storm-related claims will be covered properly by insurers.”
Crowley emphasized that the bills are only the beginning of the commission’s work.
“The huge rate increases we’ve been experiencing, the demands for structural changes to people’s homes, and the dropped policies are not going to go away unless we take the insurance companies – or the reinsurance companies – to task. We have to demand that they either show us the data justifying the costs they’re passing on to homeowners or stop charging homeowners so much,” he said.
