NCOIL Avoids Action On Home Claims Issue

Members of the Property Casualty Committee said they felt that not enough consensus had been achieved, even though the actual proposal under discussion was a compromise derived from three different versions.

Unlike last fall, when NCOIL first considered the proposal, representatives of property-casualty insurance trade groups focused their attention on one particular section of the bill, rather than the entire measure, which they see as an overreaching concept.

At issue yesterday was a provision to prohibit insurers from taking any underwriting action based in whole or in part on claims closed without any payment from the insurer.

According to the proposal, insurers could take such an action only if they "present information that shows such events related to the risk of the insurer and treats affected consumers in a manner approved by the insurance commissioner."

Neil Alldredge, state affairs director for the National Association of Mutual Insurers, said that such a standard flies in the face of efforts of the states to streamline the whole rate approval process.

In response to a query from South Carolina Rep. Daniel L. Tripp, R-Greenville, he said he was unsure of the impact of the provision on the so-called "flex rating" laws now under consideration in states that grant carriers more leeway in setting rates than is the case in many states today.

Wesley Bissett, senior vice president for the Alexandria, Va.-based Independent Insurance Agents and Brokers of America, said the provision was borrowed from the NCOIL credit scoring model dealing with policyholders without credit history.

Industry representative said there was no general outcry in the states about the alleged abuse of property loss history as there has been over the use of personal credit background, and that the model underwent revisions at several meetings before it was approved.

One of the loss history bill's original sponsors, Rhode Island Sen. David Bates, R-Barrington, has said in the past that with a total of 32 states either having passed legislation or considering doing so, the time is ripe for national uniformity on the issue.

Next week the National Association of Insurance Commissioners will look at taking some action on the issue of property claim records. Attempts by the insurance regulators to take some action on credit scoring went nowhere after heavy industry lobbying. The NAIC did approve a series of guidelines aimed at interpreting the NCOIL model law.

North Dakota Insurance Commissioner Jim Poolman said the regulators are particularly concerned that mere inquiries are sometimes used by insurers in setting rates.

NCOIL lawmakers said the distinction between a claim and an inquiry was not as clear cut at first glance as it might seem.

"We really have to drive a wedge between these two concepts," said Texas Rep. Craig Eiland, D-Galveston, who also serves as president of NCOIL this year.

When Mr. Poolman said that a policyholder with a $1,000 deductible decides to pay the entire $1,500 cost of roofing repair himself rather than risk a premium hike, it should not be reflected in his future insurance rates.

But Louisiana Rep. Shirley Bowler, R-Harahan, said that even without payment, such an event causes the carrier loss adjustments expenses. In addition, the fact that the property incurred such damage, even if repaired, could portend future increased risk from collateral damage down the line.

Some lawmakers and industry representatives said the best solution might go back to an original concept of having the model exempt property owners from a certain number of such incidents in underwriting their policies.