The Property Casualty Insurers Association of America and the American Insurance Association both expressed concerns over a bill proposed by Maine’s Governor John Baldacci, which the PCI says will “further restrict the ability of insurance companies to make decisions regarding renewal or cancellation of homeowners policies in Maine.”
The bill, L.D. 1853, was the subject of a public hearing by the Joint Standing Committee on Insurance and Financial Services on Monday. “We are particularly concerned about provisions in the bill dealing with notice of cancellation, and the appeal process when an insurer decides not to renew a homeowners policy,” stated Frank O’Brien, PCI’s vice president and New England regional manager. “The bill would essentially reverse York Insurance Co. of Maine v. Maine Bureau of Insurance, an important court ruling issued last August that limited the authority of the Insurance Superintendent to make arbitrary decisions in appeals cases.”
Paul Moran, AIA vice president, northeast region, indicated that the “bill would essentially make the state’s Insurance Superintendent the de facto underwriter for property coverage. Insurers must have the flexibility to choose the kinds of risk that they can accept within their books of business. While underwriting guidelines cannot be applied in an arbitrary or discriminatory manner, neither should they be ignored nor overridden by the Insurance Bureau as this bill contemplates.” He added that passage of the bill in its present form would “put the Bureau in the business of micro-managing every insurer decision and that will make the market more difficult.”
O’Brien also noted that the bill would re-impose restraints on an insurance company’s ability to make market-based underwriting decisions and would give the Superintendent authority to force insurers to maintain coverage on risks that, for prudent business reasons, they have chosen not to cover.”
He urged the committee to consider an industry amendment based upon the provisions of LD 667, a bill filed by insurers last year. “This proposed amendment goes in a different direction than that proposed by the Governor and Superintendent,” O’Brien noted. “Instead of adding additional restrictions and burdens, the industry amendment attacks the root cause of the problem in Maine by making various portions of the insurance law less restrictive and more flexible. This will result in a more competitive market for companies.”
The bill is before the Insurance and Financial Services Committee for a hearing today and a work session is scheduled for Wednesday, Feb. 25, 2004. Both insurance organizations are expected to testify.
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