Insurance and Real Estate Committee

JOINT FAVORABLE REPORT

Bill No.:

HB-6380

Title:

AN ACT CONCERNING PROPERTY AND CASUALTY INSURANCE POLICIES AND HOME IMPROVEMENT CONTRACTORS.

Vote Date:

3/14/2013

Vote Action:

Joint Favorable Substitute

PH Date:

3/5/2013

File No.:

SPONSORS OF BILL:

Insurance and Real Estate Committee

REASONS FOR BILL:

This bill adds a requirement in regards to matching of parts or materials and restricts the ability of home improvement contractors to serve as a public adjuster, it also protects homeowners from being nonrenewal solely due to submission of a catastrophe loss(s) and does not permit the surcharge of de minimus claims.

Substitute Language: Section (1) a matching provision limited to real property, section 2-line 26 “on a claim” deleted and “an increase” changed to “any increase”. Line 28 “solely” inserted section 3 deleted.

RESPONSE FROM ADMINISTRATION/AGENCY:

State of Connecticut, Department of Insurance testified on HB 6380 suggesting changes to the proposed language. Section 1is too broad and encompasses both property and automobile insurance coverages. We believe this issue is more specific to homeowner losses and would suggest the language be modified to only apply to the homeowner line of business. Section 2 (a), (b), and (c) are sections that we support because we think it will serve as good consumer protections. We believe that the provisions of this bill will ensure that insured will not have to worry about a company taking adverse action based on the submission of catastrophe claims. The department requests two technical changes to this bill, under Section 2 (b). The concept surcharge on a claim is inaccurate and should be removed. Policies may be surcharged as a result of a claim but that possibility is mentioned in other language. On line 28 we suggest that the word “solely” should be added after “based” so the amended language would read “based solely…”.

NATURE AND SOURCES OF SUPPORT:

Phil Flaker, Public Insurance Adjuster stated that the real problem is that insured's are not being really indemnified and neither is their expectation of insurance being met when an insurer and USAA and the Nationwide say right in their policies, “we will not match, whether it works or not.” People tell me were not a matching state like Florida, this portion of the statue may not be favored by the insurance department but it is a consumer friendly portion of the bill that we support. In terms of the insurance contractors being regulated you might want to consider A.) the fact that if they don't charge a specific fee then just work it in and still try to represent and B.) perhaps they should be prohibited from soliciting between eight and eight. Nobody needs to have five contractors on the lawn trying to hawk their wares and bother somebody who just lost their home.

Richard Ouellette, Public Adjuster, Nutmeg Adjusters testified on the fact that between 13 and 18 states have already adopted the NAIC guidelines, that has matching in the language of that Act of that format. As public adjusters we experience a volume of claims in regards to fires and people being forced out of their home due to their house having significant fire damage. If the client receives a non-renewal notice in the mail even if they had claims on things such as a tornado or a windstorm claim. They will not receive a homeowner's policy because they are not living in a home anymore and will be forced to go into the surplus line market or the builders risk market which increases that premium dollar and the coverage's are far less. In terms of contractors acting as public adjusters we agree with the right to eight rule and we are fore barring the contractors as well.

Kara Demorro, Public Adjuster testified about the third section number 9 of the bill. This bill says that contractors wouldn't be considered as acting as a public adjusters if they weren't taking a fee for doing such. My understanding is that these contractors are coming in trying to take over claims with the insured by saying that they are going to represent them and negotiate a claim with the insurance company. Which implies that there is no need to hire a public adjusters since everything is taken care of. The fee is built into whatever they work out with the insurance company. The problem here is that contractors are trying to come in and manipulate the claim. The language should be adjusted so that the contractor is not taking a fee or acting as a public adjuster when negotiating a claim.

Todd Moler, Public Adjuster testified in regards to the matching issue, and stated that if you were missing a couple of shingles on your roof prior to a claim then it would be patched. Then it used to be uniformity where they would re-roof a house or reside the area. People buy insurance to protect their investment and the value of their home and they are being taken advantage of by overzealous adjusters and companies that are being trained to minimize the indemnity. The public adjusting profession exists to keep the insurance companies in check.

NATURE AND SOURCES OF OPPOSITION:

Robert Kehmna, Insurance Association of Connecticut testified against certain sections of the bill. Section 1 will increase repair costs under personal and commercial risk insurance policies by requiring the repair/replacement of undamaged items, with a corresponding rise in premiums. The vague mandate of section 1 that requires “uniformity” according to highly subjective terms, such as composition, color, texture and quality will increase disputed which will result in increased administrative costs. The language in this bill turns a homeowner's policy into a maintenance policy, as it creates a disincentive for policy holder to do proper ongoing maintenance work or to take reasonable measures to limit losses. IAC opposes subsection (a) and (c) of section 2, as loss history, of whatever size or source, is a strong indicator of the likelihood of future losses under a homeowners policy. The location of the home under subsection (a) could make it susceptible to future losses “as a result of a catastrophic event”. It is unclear as to what a “catastrophic event” is in this context. Also in subsection (c), the lack of payment on the claim does not necessarily mean a loss did not occur. Small loss payout does not mean the claim should not be considered for rating or underwriting purposes as it could be indicative of future losses. Insurers do not report, to claims data collection entities, the fact that an insured made an inquiry regarding coverage or deductible questions. Since that data is not collected, such inquiries are not used for underwriting or rating purposes. The word “solely” in section 2 (b) should be inserted after “based” in line 28 of section 2(b). We reject section 1 and subsection (a) and (c) of section 2 of the proposed legislature.

Reported by: Chris Chinnici

Date: 4/2/13