NCOIL Okays Claims History Model
The National Conference of Insurance Legislators has approved model legislation regulating the use of consumer claims history data in property insurance underwriting.
The action came at the group's summer meeting last week in Newport, R.I.
Among the items in the model law is a section prohibiting underwriters from taking any action based solely on the history of the property, as opposed to the applicant's history.
In NCOIL's discussion leading up to approval of the model the most contentious issue was the item referred to as "claims without payment." The law allows underwriters to take an adverse action after a policyholder has opened up more than one claim where no payment resulted.
The model legislation does prohibit carriers from taking any underwriting action based on an inquiry that does not result in a request for payment. But lawmakers expressed concern that many states may define claims to include what many would deem mere inquiries.
Carriers maintained that a policyholder who opens up more than one such claim will more than likely in the future incur greater losses than otherwise would be the case.
But lawmakers feared that the provision would inhibit policyholders from contacting their agents to explore their options in the event of a loss for fear of facing rate hikes as a result.
Vermont State Rep. Virginia Milkey, D-Brattleboro, expressed skepticism about sales of insurance that resulted in premium rate increases for consumers whenever they brought a claim, commenting, "This is not insurance. It is more an extended payment program."
Florida State Rep. Steve Geller, D-Hallandale Beach, proposed a substitute motion that would allow policyholders three such claims without payment incidents before it could impact their rates. "Because to me that would be indicative of future losses," he said.
But his motion failed, which only added to his frustration about the bill that he termed "was a consensus of the insurance [industry] agreeing with itself."
The measure's sponsor, Rhode Island Sen. David Bates, R-Barrington, said with more than 30 states either taking action or contemplating some sort of legislation regarding claims history databases, the time was ripe for uniformity in the area.
The National Association of Insurance Commissioners has been considering taking action, which could now include endorsing the NCOIL model to make a better case in the state legislatures in the coming months.
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