Insurers, agents worry Conn. coastal rules could make matters worse

By | December 25, 2006

Insurers aren’t happy and agents are worried about new restrictions on coastal property underwriting being imposed by Connecticut Insurance Commissioner Susan Cogswell in a reversal of her previous policy. They warn that the rules could worsen the problem of insurance availability she is trying to fix.

Earlier this month, Cogswell decided that home insurers may no longer require permanently installed storm shutters as a condition for writing or renewing policies but must offer consumer choices of loss mitigation controls and deductibles. In a previous decision, she had permitted an insurer to require shutters.

Cogswell said her department found “there is an availability problem for homeowners insurance within the admitted markets for homes located within 1,000 feet of the coast.” The report found that 59 percent of the market imposes mandatory mitigation requirements of some type for new business while the remaining 36 percent are offering a choice to new customers of mitigation or increased deductibles or no requirements at all.

Only 5 percent of the market requires mandatory shutters for renewal business. The remaining 91 percent is offering a choice or imposing no requirements.

Cogswell maintains she reversed the shutter policy and issued other recommendations in hopes of dealing with the availability problem before it gets worse.

But insurers say that Cogswell’s restrictions on what mitigation steps they can require of coastal homeowners will only make them even less willing to write along the coast.

“Connecticut has a functioning homeowners insurance market in which property owners are able to obtain coverage. The department report found as much itself. Nevertheless, the report outlines onerous restrictions,” said Paul Tetrault, Northeast state affairs manager for National Association of Mutual Insurance Companies.

According to Tetrault, the restrictions are the wrong way to go. “Not only are these restrictions unwarranted, they are counterproductive since they will have an effect that is the precise opposite of what is intended,” he added.

According to Kristina Baldwin, regional manager and counsel for Property Casualty Insurers of America, Connecticut’s new guidelines are “among the most restrictive in the nation.”

Mitigation options
Under the rules on mitigation and shutters, consumers must be allowed to use a variety of loss mitigation measures recommended by the Institute for Business & Home Safety, including plywood shutters or impact resistant glass. Carriers may also apply a hurricane deductible.

If both loss mitigation measures and deductibles are imposed, companies are required to reduce the premiums or deductibles.

Companies will be able refuse to issue new policies for consumers who fail to take any of the mitigation measures but can only refuse to renew a policy if the insured refuses to employ any of the mitigation options (including plywood) and if the insured refuses to accept a hurricane deductible.

Cogswell is also recommending that the state create a voluntary Coastal Market Assistance Plan (C-MAP) in which risks could be presented to insurers on a voluntary basis for their consideration as an alternative for those who cannot afford loss mitigation measures and deductibles, or do not want an excess and surplus lines policy.

But if the voluntary approach of a C-MAP does not work, she said she will recommend that the FAIR Plan expand to offer a full homeowners policy.

The ink was barely dry on the recommendations, when the state’s leading homeowners insurer, Allstate, announced it would stop selling new policies. (See related story on this page.)

While Allstate said its decision did not come about as a result of the new rules, its decision could exacerbate insurance availability problems.

“I hope we are not developing our own perfect storm scenario here. Companies are already struggling to figure out how to operate under the new coastal rules and now Allstate makes this announcement,” said Warren Ruppar, executive vice president for the Independent Insurance Agents of Conn.

Attorney General Richard Blumenthal said Cogswell’s new policy has come too late to help many consumers and that insurers’ practices need to be more closely examined.

Topics Carriers Agencies Connecticut Homeowners

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