Insurance and Real Estate Committee
JOINT FAVORABLE REPORT
AN ACT CONCERNING CHANGES TO THE PROPERTY AND CASUALTY INSURANCE STATUTES.
Joint Favorable Substitute
SPONSORS OF BILL:
Insurance and Real Estate Committee
REASONS FOR BILL:
This bill would prohibit insurers from refusing to issue or renew a homeowner's policy because the insured failed to install storm shutters and require insured to give a premium discount for the installation of temporary shutters. It will amend a law which prohibits insurers from declining, cancelling or non-renewing a homeowners policy based solely on a loss as a result of one catastrophic event and would increase the time period during which suit must be brought under the standard fire policy from eighteen to twenty-four months.
The following changes were :
Sec 1 of substitute is sec 1 of raised bill #5502 w/”on or after October 1, 2014” added
Sec 2 of substitute is sec 3 of raised bill 5502 w/loss incurred language changed
Sec 3 of substitute is sec 4 of raised bill 5502 w/additional effective date language (no other change)
Sec 4 of substitute is sec 6 of raised bill 5502 w/only the change in (b) retained
Sec 5 of substitute is sec 7 of raised bill 5502 w/effective date change 10/1/2014>> from passage (no other change)
Sec 6 of substitute is sec 1 of raised bill 5365 w/” or renewed on or after January 1, 2015” added, and effective date change 10/1/2014>> 1/1/2015
Sec 7 of substitute is sec 2 of raised bill 5365 w/effective date change 10/1/14>>from passage, and a technical change
Sec 8 of substitute is sec 1 raised bill 5366 w/effective date change 10/1/14>> 7/1/14 (no other change)
RESPONSE FROM ADMINISTRATION/AGENCY:
George Bradner, Director ,Property & Casualty Division, State of Connecticut, Department of Insurance testified that the department recognizes and appreciates the intent of the bill is to help CT homeowners by removing what some consider a burdensome requirement in protecting their property. However, this bill maybe fraught with unintended consequences resulting in issues of affordability and availability. This bill would be setting up coastal homeowners for the “perfect storm”. Our other concerns are found in Section 1 which eliminates the work “Permanent”, this means insurers would not be able to require policyholders living within 2,600 feet of the coast, which is the most unprotected area in the state, to have some form of mitigation to protect their homes from hurricane force winds.
Our state has experienced some of the most damaging storms in recent memory, none of which were officially designated hurricanes, and the state of Ct should avoid discouraging individuals from taking precautionary measures to protect their property. Legislation promoting coastal leniency will likely result in increased rates and/or industry's departure from the Connecticut market.
Many individuals are still not in their homes and are struggling to make ends meet as they have found that their homeowner insurance, flood insurance or FEMA assistance does not come close to covering all their losses.
The Department submitted additional testimony after the March 11th public hearing on “Coastal Guidelines”. Under the Connecticut General Statutes, all insurers writing homeowners insurance are required to file their Coast Guidelines with the Department. The Department issued its first set of Coastal Guidelines outlining the Department's expectations on what the industry could or could not do with respect to the use of deductible or shutters. They had the authority to do this under our Underwriting Rules and Regulations statute. The legislature at no time, seek to limit or otherwise restrict the Department's use of the Coastal Guidelines that are used to manage coastal homeowners' insurance availability.
The bill as it is currently worded does not properly set forth the legislative intent if that intent is to prohibit an insurer from imposing on an insured any requirement to have any form of shutters for mitigation (including plywood).This bill as worded, could still allow an insurer to require an insured to have plywood on hand as a condition to writing the business, however, in the event of a loss and the shutters were not installed the insurer cannot cancel or nonrenew solely on that basis. (Please review the attached analysis done by our examiner).
We would also like to clarify that in 2012 the Department participated in a survey with other NAIC Northeast Zone states and based on that survey, learned that New Jersey, Maryland, and Rhode Island do allow industry to use mitigation however, if the insured does mitigate, those states require that the insurer either lower or eliminate the hurricane/wind deductible.
Connecticut is the only state that does require insurers to file their underwriting guidelines, thus the reason why we have better knowledge of what industry is doing in Connecticut.
Our Coastal Guidelines state that an insurer can only require shutter (and pre-cut), pre-drilled plywood being acceptable) for new business only on homeowners located within 2600 feet of the coast.
For homeowners over 2600 feet from the coast and only within designated coastal towns as determined by the Department based on factual industry data, the insurer can offer to the insured the option of a hurricane deductible or non-permanent shutters and this applies to new business only and it is the consumer's choice, not the insurer's choice.
NATURE AND SOURCES OF SUPPORT:
Senator Martin Looney, 11th District testimony stated this bill will require storm shutter rather than permanent storm shutters for the purposes of insurance coverage for loss due to hurricanes and other severe storms, and defines that the prohibition against policy cancellation apply to any catastrophic event. It also states that a public adjuster may discuss with an insurer first-party property loss or damage or a claim on behalf of an insured. And changes the time period that a suite or action may be brought from 18 to 24 months, and will allow an insurer to provide flood insurance coverage in this state on a less than state-wide basis.
Richard Ouellette, President, CT Association of Public Adjusters (CAPIA) spoke on the bill stating his support of the following:
- That the installation of storm shutter should be enough and need not be permanently attached.
-Notice of cancellation or non-renewal
-Time frame for suit or action against the insurance company is good for the consumer. Many times at the end of a claim, we need to now ask for an extension of the 18 months and this would help eliminate that exercise as the consumer's advocate.
-Extending the duties of the Public Adjuster to be able to discuss coverage is great. However, the language needs to be better defined. He suggests reviewing the National Association of Insurance Commissioners-Public Adjuster Licensing Mode Act #228 for language.
-Public Adjuster Employment Contracts shall be void ab initio, if signed after 8:00PM and before 8:00AM. This does not apply for most firms, but for those who break the rules, this would be further ability to cancel the contract. Language is redundant' laws already state not to allow to solicit.
The following also voiced their opinions on the bill:
NATURE AND SOURCES OF OPPOSITION:
Robert Kehman, President, Insurance Association of Connecticut testified opposing many sections of the bill. Section 1 would provide that insurers cannot refuse to issue or renew a homeowner's insurance policy on the basis that the insured did not install storm shutter on the dwelling. We believe such a change could be counterproductive, as it would diminish the likelihood of proper loss mitigation efforts being undertaken where they are most needed. And it would restrict an insurer's ability to control its risk exposure in high risk areas, which could have a negative effect on the homeowners' insurance market, to the detriment on consumers across the state.
In Section 2 currently the requirement is triggered by the installation of permanent storm shutters. Discounts are supposed to be based on “sound actuarial principles, yet the removal of “permanent” would make such a determination high questionable if not impossible.
Section 3 would amend CGS 38a-316D to prohibit homeowners insurers from underwriting based on a loss from “any” rather than “a” catastrophic event. If an insured property has losses, there are likely reasons for that experience that increases the probability of future claims. If insurers are forced to ignore legitimate underwriting tools, they will be unable to properly manage their risk exposure, putting unnecessary strain on the homeowners insurance market.
We also oppose Section 4 and feel the change in this section could also be contrary to public policy behind municipal anti-blight ordinances which are designed to encourage the quick resolution of claims and repair of damaged buildings for the public good and feel no reason for any further increases.
In Section 4 the change due to the vagueness of the term “discuss”, and section 5 will require insurance agents to be licensed as public adjusters.
And Section 6 remove the requirement that certain notifications be displayed on the first page of a public adjuster contract.
Property Casualty Insurers Association of America written testimony states many CT homeowners are already struggling to pay their insurance premiums and make end meet and changing the law to allow more lawsuits under the standard fire policy will likely only exacerbate affordability issues with regard to the coverage.
Independent Insurance Agents of Connecticut, Inc. submitted testimony in regards to section 5-1 (c) which states that any person who discusses with the insured's insurance company first-party property loss or damage under the insured's policy or a first party claim” would be defined as a “public adjuster”. This language is very broad and appears to include an insurance producer, any agency staff person or customer services representative in the definition of “public adjuster”.
The section 6-2(b) there is also a restriction on when a “public adjuster” may contact an insured. This restriction may hinder the ability of a producer, agency staff or customer service representative in talking with an insured in the event of a claim if the definition in section 5-1 (c) remains. We suggest that insurance producers, agency staff and customer service representatives be exempted from this definition so that they may assist their customer when a loss occurs.
Reported by: Diane Kubeck
Date: April 1, 2014