Turkington Sets Priorities For Home Insurance

Posted in: Region
By MICHAEL C. BAILEY
Nov 8, 2007 - 8:44:26 AM
Digg this story!

Printer friendly page

     With a report from the special legislative commission on homeowners’ insurance slated for release later this month, State Representative Eric T. Turkington (D - Falmouth), is hoping to push the final list of recommendations in a direction that would benefit Cape homeowners.
     Late last month Mr. Turkington, who sat on the commission, filed a letter with State Senator Stephen J. Buoniconti (D - West Springfield), commission chairman, listing “my own list of priorities I would like to see the commission adopt.”
     “As we have all learned, the subject is complex and the factors that affect homeowners insurance pricing in Massachusetts are global,” Mr. Turkington said in his letter. “But out of all the testimony and discussion the commission had heard I think 10 points have emerged that would address the skyrocketing premiums and disappearing insurers that characterize this broken market.”
     Mr. Turkington’s 10 recommendations:
     •<2002>Create a state catastrophic fund to buffer the effect of a large t due to a major disaster; State Senator Robert A. O’Leary (D - Barnstable) filed a bill this year to create such a fund
     •<2002>Amend or repeal the state law that allows the Massachusetts FAIR (Fair Access to Insurance Requirements) Plan to request and receive a 25 percent rate hike, the current requested increase for Cape Cod policyholders
     •<2002>Open computer models used to determine rates for public scrutiny, or bar their use in setting rates
     •<2002>Add a seat to the FAIR Plan board specifically for a homeowner whose property is insured through the state-run insurance program
     •<2002>Require the Massachusetts Division of Insurance to hold public hearings on all requested rate increases
     •<2002>Require insurance policies to apply the wind deductible only in instances of a named storm
     •<2002>Amend FAIR Plan rules regarding the allocation of gains or losses to provide a credit to insurance providers who write policies for coastal properties
     •<2002>Require the production and distribution of educational brochuresd to people purchasing auto insurance, to explain homeowners’ options and ways to save money
     •<2002>Provide homeowners with a premium credit for taking preventive measures to protect their property from storm damage
     •<2002>Allow FAIR Plan policyholders to pay their premiums over a 10-month period without penalty
     The 16-member commission—composed of legislators, state officials, and representatives of the insurance industry—held a series of hearings across the state over the summer, receiving testimony from local officials and the public on how the insurance crisis has impacted them.
     The Cape is among the hardest hit regions due to its high number of coastal properties. Over the past four years several insurance companies have revoked policies for Cape homeowners due to the high risk of wind-driven storm damage, and as a result more than 42,000 properties are now covered by the state-run FAIR Plan.
     Companies have cited the rising cost of “re-insurance”—insurance that insurance providers take out to cover themshe event of a large pay-out—as the reason for their pulling policies, noting the other course of action would have been to greatly increase premiums.
     Homeowners have disputed this claim, stating that insurance companies are relying on faulty computer models in determining rates rather than historical data.
     That theory is supported in a report issued by the Consumer Federation of America entitled “Property/Casualty Insurance in 2007: Overpriced Insurance, Underpaid Claims, Declining Losses and Unjustified Profits.”
     That report stated that insurance companies are “paying out lower claims, charging higher premiums, reaping greater profits, and are more financially solid than at almost any time in history,” and stand to “reap hefty profits” for years to come.
     Estimates for 2006 indicated that 68.3 percent of premiums paid to insurance providers would be paid back out in claims, the lowest the rate has been since 1980. In 2004, the insurance industry reported a record-high net profit of $40.5 billion, and hit a second historical high in 2005 $48.8 billion, that latter figure coming despite the catastrophic damage of Hurricane Katrina.